China’s top central banker says that potential escalation of trade tensions and policy uncertainty were the major risk factors facing the world economy, and market forces were keeping China’s yuan at an appropriate level.
Yi Gang, the governor of the People’s Bank of China, said in a statement to the International Monetary Fund’s steering committee that Beijing is “deeply disappointed” in the IMF’s failure to realign its shareholding structure to recognise the rising influence of China and other fast-growing economies.
Yi pushed back against the US Treasury’s August 5 designation of China as a currency manipulator after China’s yuan fell below the psychologically important level of 7 to the dollar.
His statement said that the depreciation in the yuan since the beginning of August has been driven by market forces, including volatility prompted by escalating trade tensions. Yi added that there was “growing market acceptance for two-way exchange rate fluctuations” in the yuan, also known as the renminbi or RMB.
“Judging both from economic fundamentals and from market supply and demand, the RMB exchange rate is at an appropriate level,” Yi said.
In a dig at the Trump administration’s “America First” trade stance, Yi said: “the wave of populism and protectionism in some countries has undermined mutual trust, reducing their willingness to co-operate on a multilateral basis.”
Yi’s statement did not mention the “Phase 1” trade deal that US President Donald Trump announced on October 11, but warned of the problems that trade tensions have caused for the global economy.
“Signs of disruptions have emerged in global trade and in global industry chains, supply chains, and value chains,” he said. “Trade tensions have dampened market confidence, which may amplify financial market volatility and drag down economic growth.”