Central bank vice-governor voices confidence amid currency volatility
The monetary authority vowed to stabilize the renminbi amid escalated trade tensions, while continuing to push forward financial opening-up and protecting overseas investors' legal rights, said a senior official from the central bank on Sunday.
"We have the foundation, confidence and capacity to maintain a stable foreign exchange market in China, and keep the renminbi exchange rate at a reasonably stable equilibrium," said Pan Gongsheng, vice-governor of the People's Bank of China, the central bank, said in a statement on its website.
Before his pledge, the onshore renminbi rate depreciated to 6.9182 per dollar at Friday's close, the weakest level since December, and the offshore renminbi rate hit its lowest level since November. Trade talks between China and the United States recently faltered and a large amount of additional tariffs are expected to be imposed on imports from both sides.
China will take necessary measures, in response to foreign exchange market fluctuations, including using a strengthened risk management system, said Pan.
He also stressed that authorities would crack down on illegal activities in foreign exchange trading.
"China has sufficient policy tools," said Pan, who is also director of the State Administration of Foreign Exchange, the country's foreign exchange regulator.
The PBOC vice-governor also confirmed on Sunday that China will continually implement opening-up policies and improve the environment for overseas investors and protect the legal rights of foreign investors.
China will further open the financial market to welcome more overseas investors in. The cross-border trade and investment will be more free and convenient, said Pan.
He called China's economy stable, as the major economic indicators were within a reasonable range.
In April, the National Bureau of Statistics said the purchasing managers' index for the manufacturing sector stood at 50.1, indicating expansion as the reading was above 50.
The broad money supply, or M2, increased 8.5 percent year-on-year by the end of April, compared with 8.3 percent a year earlier.
"The prudential monetary policy was focused on countercyclical adjustments this year, maintaining flexibility as well as ample liquidity to promote fast growth of credit and strengthened support of private and small enterprises," Pan added.
The China-US trade disputes have significantly influenced the renminbi's performance, said Wang Shengzu, co-head of Investment Strategy Group Asia Goldman Sachs.
But the currency is unlikely to slip out of a reasonable range, assuming there is no big shock from the trade talks, Wang said.
As a sound base for a stable renminbi, "the Chinese economy has shown signs of bouncing up, shown by the faster-than-expected growth of industrial output, retail sales, and credit in the first quarter, and this means that economic activity is improving with supportive policies", said Wang.