Chinese officials stress ‘basic stability’ in yuan’s exchange rate, warn against betting
Published: Sep 28, 2022 09:54 PM
China's central bank Photo: CFP

China's central bank Photo: CFP

Chinese officials held a meeting to analyze the recent movements in the foreign exchange market, stressing that the yuan's exchange rate has maintained "basic stability" at a reasonable and balanced level this year, while warning against betting on one-way appreciation or depreciation of the currency, according to an official statement on Wednesday. 

Although the yuan has depreciated against the US dollar, the range of depreciation is just half of the US dollar's appreciation range, the meeting on Tuesday noted, the People's Bank of China (PBC), the central bank, said in the statement. 

Also, the yuan has appreciated markedly against the euro, the yen and other currencies, and it remains one of the few strong currencies in the world, the meeting noted. In comparison, the euro has depreciated by about 19 percent against the US dollar so far this year. 

The meeting also cautioned investors against betting on the yuan, saying that some companies have been engaging in currency speculation or flouting regulations. Officials said that it's normal for the yuan to fluctuate in a two-way manner, and investors should not bet on one-way appreciation or depreciation of the yuan. 

"Those who bet for a long time will surely lose," the statement said. 

Despite recent depreciation, the PBC still has the ability to keep the yuan's exchange rate stable, said experts after the offshore and onshore yuan both weakened to break the 7.2 per dollar level on Wednesday.

The yuan's central parity exchange rate against the US dollar slipped by 385 basis points to stand at 7.1107 on Wednesday, official data showed.

The weakening of the yuan, along with other major global currencies, came as the US dollar pushed to a 20-year high on Wednesday amid a stubborn US Federal Reserve interest rate hike cycle.

Officials stressed during the meeting that the yuan's stability has a "solid foundation," as the Chinese economy is generally recovering, compared with many economies that face stagnation risks.

Experts also said that China's exchange rate is still fluctuating within a normal range, and that its recent fluctuation won't have much impact on China's macro economy in the long term. 

The yuan's slide against the US dollar is still not far away from the flexible floating range, Dong Dengxin, director of the Finance and Securities Institute of the Wuhan University of Science and Technology, told the Global Times on Wednesday.

"Judging from the scale of China's foreign exchange reserves, China's central bank has the capacity to keep the exchange rate stable and any moves by the central bank should have an immediate effect," Dong said.

Yang Delong, chief economist at Shenzhen-based First Seafront Fund Management Co, told the Global Times that the yuan's depreciation will have little impact on China's economy in the long term, as the yuan's volatility since August has not affected the basic trend of stable operations on China's foreign exchange market.

According to Yang, the yuan's moves are contingent on the recovery pace of China's economic fundamentals. 

"The stronger the economic recovery is, the more support it will give to the exchange rate. As China's economy is expected to continue a steady recovery in the fourth quarter, it will also form support for the yuan," Yang said.