MNI POLICY: China Won't Use Yuan to Counter Trade Spat:PBOC Yi

     BEIJING (MNI) - China's central bank Governor Yi Gang said the country

won't use exchange rates as a tool to deal with trade conflicts, engage in

competitive devaluation, or use forex for competitive purposes, and maintain

letting the market decide exchange rates.

     Yi made a rare statement on Monday through the People's Bank of China

(PBOC)'s WeChat account, following the yuan weakening below seven against the

dollar, a critical level that many saw the PBOC had vigorously defended before.

It also followed U.S. President Donald Trump last Friday unexpectedly announcing

a 10% tariff hike on $300 billion Chinese exports starting Sept 1. 

     The yuan closed at 7.0352 against the dollar from Friday's close of 6.9416,

the weakest since March 2008. The PBOC set a fixing at 6.9225 today, the weakest

since December 2018.

     "The yuan exchange rate is at an appropriate level" whether it's based

China's economic fundamentals or supply and demand, Yi said, adding that he is

"full of confidence in yuan as a dominant currency" despite the impact from

external uncertainties. 

     China can keep the yuan basically stable given its stable and growing

economy, global balance of payment, ample forex reserves, greater use of hedging

tools by businesses and appropriate rate differentials against those of major

developed economies, Yi said. 

     The yuan's recent volatilities were driven and decided by the market after

changes in global economy and trade frictions, and the yuan was along many other

currencies that weakened against the dollar, Yi said without directly mentioning

China's trade war with the U.S.

     The PBOC and the State Administration of Foreign Exchange will keep forex

management stable and consistent and meet the legitimate demand for forex by

companies and individuals, Yi said. 

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

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