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Official says China won't take part in currency wars

By Wang Xiaotian (China Daily)

09:16, March 13, 2013

China won't engage in any "currency wars" by depreciating the value of the yuan through monetary easing policies to shore up the economy, as some major economies have done, said a former deputy central bank governor on Tuesday.

"The yuan will continue to fluctuate in both directions as the central bank strengthens market-oriented reforms," said Wu Xiaoling, who is still closely connected to the People's Bank of China and is now the vice-chairman of the National People's Congress Financial and Economic Affairs Committee.

The easing policies conducted by some major economies, such as Japan, are similar to "quenching thirst with poison", she said at a press conference.

"Printing more money and devaluating the currency could be useful to promote economic growth over a certain period. But if a country doesn't have a sound economic structure or strong growth momentum, it would be poisonous to depend on a looser monetary stance," Wu said.

Her remarks come after a report in Japan's leading economic daily Nikkei said that the Bank of Japan's recently appointed leaders might launch fresh easing measures before their first policy meeting next month.

The yen was under pressure in Asia on Tuesday as the US dollar strengthened, with 96.7 Japanese yen against the greenback, the highest level since August 2009.

The yen has depreciated about 20 percent since the new Japanese government took office at the end of last year. In January, the BOJ announced plans to undertake "unlimited" easing policies to fight against the country's lingering deflation.

"Instead of intervening in the currency market to contain appreciation and stimulate exports, China needs to create a fair and competitive financial environment for domestic companies, and continue to promote the reform of the international monetary system," Wu said.

She said the yuan's exchange rate is already very close to its equilibrium level as the difference between the onshore rate and its non-deliverable forwards on the offshore market is narrowing.

PBOC's deputy governor Yi Gang last week urged major economies to avoid the competitive devaluation of their currencies and said that G20 countries should comply with the group's joint statement and reach a consensus.

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