‘Some yuan flexibility good’

SHANGHAI: A “little bit of flexibility” in the yuan currency is good for the Chinese and global economies, and pressure on the yuan caused by the China-U.S. trade war would be temporary, Bloomberg quoted China’s central bank chief Yi Gang as saying on Friday.

Asked if there was a red line for the yuan, which has shed more than 3 percent against the dollar since mid-April and was flirting with the 7-per-dollar level, Yi said no “numerical number” was more important than another.

“The trade war would have a temporary depreciation pressure on renminbi, but you see, after the noise, renminbi will continue to be very stable and relatively strong compared to emerging market currencies, even compared to convertible currencies,” Yi said, using the yuan’s official name.

“I’m very confident renminbi will continue to be stable at a more or less equilibrium level.”

On monetary policy, the People’s Bank of China governor said there was “tremendous” room to make adjustments if the China-U.S. trade war worsens.

“We have plenty of room in interest rates, we have plenty of room in required reserve ratio rate, and also for the fiscal, monetary policy toolkit, I think the room for adjustment is tremendous,” Yi said.

Yi said a scheduled meeting with U.S. Treasury Secretary Steven Mnuchin this weekend on the sidelines of a G20 meeting in Japan it would probably be a “productive talk, as always,” but the topic of the trade war would be “uncertain and difficult”. Bloomberg said Yi gave no indication that the government was considering more fiscal stimulus now to counteract the effect of the trade war.

“Our fiscal policy this year is probably the largest and strongest fiscal reform package, in terms of the tax cuts, and also in terms of having more efficient fiscal resources allocation between the central government and the local government,” Yi said.

“The current package is able to cover the cases where the situation is getting a little bit worse, but of course, if the situation gets tremendously worse, they will open the discussion. But right now they haven’t discussed that scenario yet.”