MNI INTERVIEW 2: Economic Woes Push Down Yuan as PBOC Looks On

--Yuan Drops on Stalling Growth, Dim Export Outlook: Zhang

--Weaker Yuan Seen by Policymakers Aiding Exports: Zhang 

--Central Bank Likely Sees No Need to Intervene for Now: Zhang

--Adds To Zhang Interview Part 1 published Wednesday

     BEIJING (MNI) - The recent slide in the Chinese currency yuan was mostly

due to weakening economic fundamentals and market sentiment, and the People's

Bank of China (PBOC) has seen no need to intervene, Zhang Ming, a senior fellow

at the Institute of World Economics and Politics under the Chinese Academy of

Social Sciences, told MNI.

     "The central bank is taking advantage of the opportunity to let effective

exchange rate readjust and buffer against the impact on exports of the previous

sharp appreciation against the currencies basket," said Zhang, who stressed the

opinions are of his own and do not represent that of the PBOC. 

     "Plus, it helps cushion the exports as its outlook has really been gloomy

due to the Sino-U.S. trade spat," he added.

     The yuan has fallen against the dollar in the past nine trading days,

dropping 3.64% and giving back all of the year-to-date gains. Thursday's USDCNY

close of 6.6250 was the highest since Nov 2017.

     "Since depreciation can boost exports and economic growth and it is

partially generated by the escalating trade conflicts, a proper drop of the yuan

against the dollar is beneficial," Zhang said. Policymakers should keep policy

continuity and under current circumstances, refrain from regulatory intervention

in the forex market.

     --ECONOMIC DIFFERENTIATION

     The differentiation in the China-U.S. economic scenario and monetary policy

stances has contributed to the yuan's depreciation, Zhang said.

     Several recent economic indicators signaled a downturn, as consumption,

investment and exports have all been below market expectation.

     "The slip of infrastructure investment and uncertainty in exports are the

main reasons for the economic slowdown, particularly when the local government

debt-raising has been curbed and a China-U.S. trade war is looming," Zhang

warned, noting "the American economy is in a track of rising faster than its

potential growth."

     Additionally, Zhang said loosening operations by the PBOC also pressured

the yuan, as the yield differential between China and U.S continues to narrow,

Zhang said.

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

--MNI Beijing Bureau; +86 (10) 8532 5998; email: marissa.wang@marketnews.com

[TOPICS: MMQPB$,M$A$$$,M$Q$$$]