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Central bank able to maintain exchange rate stability: Experts

By Dong Feng (People's Daily)    16:37, October 18, 2018

China’s onshore and offshore yuan rate against the US dollar fell below 6.94 on Thursday, a new low since January 2017, but experts believe the central bank is capable of stabiizing the exchange rate.

Xie Yaxuan, an expert at China Merchants Securities, told the People’s Daily that the yuan’s depreciation is a result of a strong US dollar index, falling stock market prices and the foreign capital outflow.

US decided not to call China a “currency manipulator” on Thursday but kept it on a watch list with Germany, Japan, Switzerland, India and South Korea.

The Trump administration and past administrations have threatened to call China a “currency manipulator” for weakening the yuan and using it to soften the blow of tariffs. “China did not meet the criteria to be called a manipulator”, the US Treasury said.

Shao Yu, chief economist at Shanghai-based Oriental Securities, told the People’s Daily that the yuan’s weakness shows the currency’s flexibility.

If we connect the dots, in terms of policies, the yuan’s exchange rate is also part of important variable factors in trade talks between the US and China, Shao added.

The escalating trade friction between the US and China could affect the supply and demand in the foreign exchange market through two channels: one is trade channels and the other is the international capital flow, Xie said in a recent research note shown to the People’s Daily.

With the final decison pending on whether Trump and Chinese President Xi Jinping would meet at the gathering of G20 leaders in Buenos Aires at the end of November, the People's Bank of China (PBC) is completely capable of maintaining the yuan’s exchange rate between 6.8 to 7 to the US dollar, Shao stressed.

PBC chief Yi Gang pledged to keep the yuan stable. A separate communique issued by the IMF said member countries should avoid using currencies as a trade weapon.

"We will refrain from competitive devaluations and will not target our exchange rates for competitive purposes," it said.

The yuan’s exchange rate may still show a wider range of fluctuations in the future, Xie predicted.

(For the latest China news, Please follow People's Daily on Twitter and Facebook)(Web editor: Shi Xi, Bianji)

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