MNI POLICY: Osaka Outcome Better Than Expected: PBOC Head Yi

--Yi Says China Not Looking For Competitive Depreciation

By Les Commons

     HELSINKI (MNI) - The outcome of the latest talks between presidents Xi

Jinping and Donald Trump were a "little better than expected" but some caution

is still required going forward, Yi Gang, Governor of the People's Bank of

China, said here on Monday.

     If trade continues under the current framework, it will be easier for the

U.S. and China to solve ongoing issues one by one, Yi said. There will still be

uncertainties, but a constructive roadmap was laid out between the two leaders

at the G20 in Osaka, the PBOC head continued.

     Speaking at the Bank of Finland's conference on monetary policy, Yi also

gave an overview on China's current monetary and foreign exchange policy

stances.

     Among the main points he noted were:

     --The yuan has been relatively stable during trade talks and the central

bank has stayed away from direct market intervention, just offering some verbal

and macroprudential moves to ensure stability. The PBOC has not intervened in

the currency markets since 2015, Yi said. 

     China is not looking for a competitive devaluation of the yuan and the

markets play a dominant role in the formation of the exchange rate.

     -- The PBOC will continue with its prudent monetary policy, neither too

tight or too loose, and it will continue with interest rate liberalization.

     -- The central bank is using its discount window to support smaller and

community banks to provide loans to the real economy.

     --Other policy goals include improving the transmission of monetary policy,

along with coordinating domestic and external policy.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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