China rules out weakening yuan to boost trade
In this Friday, June 8, 2012 photo, a clerk counts Chinese banknotes at a bank in Huaibei in central China's Anhui province. (Chinatopix via AP, File)
Paul Traynor, The Associated Press
Published Thursday, February 25, 2016 10:35PM EST
Last Updated Thursday, February 25, 2016 11:22PM EST
SHANGHAI - China's central bank chief promised Friday to avoid weakening its yuan to boost sagging exports as he tried to reassure nervous financial markets about his government's handling of its economy and currency at the start of a closely watched gathering of global finance officials.
Beijing wanted to use the gathering of finance ministers and central bankers from the Group of 20 rich and developing countries to promote its campaign for a bigger voice in managing global trade and finance. Instead, the communist government is scrambling to defend its reputation for economic competence following stock market and currency turmoil.
A key worry, despite repeated Chinese denials, is that Beijing will allow its yuan to decline in value to support struggling exporters. That expectation has driven an outflow of capital from China that spiked to a record $135 billion in December.
"We will not resort to competitive depreciation to boost our advance in exports," said Zhou Xiaochuan, governor of the People's Bank of China, at a news conference.
Zhou said the meeting of finance officials from the United States, Japan, Europe and other major economies should focus on managing lacklustre global demand, structural economic reforms and promoting "sustainable and balanced" growth.
Other officials attending the meeting include U.S. Treasury Secretary Jacob Lew and Federal Reserve Chairwoman Janet Yellen; China's finance minister, Lou Jiwei and their counterparts from Germany, Britain, Japan, South Korea, India and South Africa.
Global growth has slowed to its lowest rate in two years and private sector forecasters say the danger of a worldwide recession is rising. The International Monetary Fund cut its forecast for this year's global growth by 0.2 percentage points last month to 3.4 per cent. It said another downgrade is likely in its April update.
Japanese and Eurozone officials have called for co-ordinated global action but have yet to say what they might propose at the Shanghai meeting.
The foreign view of China's economic health was shaken last year by a stock market collapse that wiped out $5 trillion in paper wealth. On Thursday, its main market index fell by an unusually large daily margin of 6.4 per cent. Last year's exports fell 2.8 per cent from 2014, well below the official target of 6 per cent growth in total trade.
The ruling Communist Party is in the midst of a marathon reform plan aimed at transforming China into a consumer-led economy and reducing reliance on trade and investment.
In separate comments at the G-20 opening ceremony, Zhou tried to reassure his audience the Chinese economy is healthy after growth slowed to a 25-year low of 7.3 per cent last year. He noted that still was among the world's strongest performances.
"China's economic fundamentals remain strong and supportive of growth," he said. "The Chinese economy will continue to grow at a moderate-to-high pace."
Economists complain the secretive Chinese government has fueled market volatility by failing to communicate policy changes clearly.
In a report ahead of the Shanghai meeting, the IMF urged G-20 leaders to support China's economic reforms but also called on Beijing to "ensure clear communication of their exchange rate policies."
Other governments are trying to douse expectations the Shanghai meeting will produce specific growth plans similar to those rolled out in 2009 in response to the global crisis.
Germany's finance minister, Wolfgang Schauble, said his government would not agree to a co-ordinated fiscal stimulus package in the event of further deterioration in the global economy. He urged other countries to deliver on promises of pro-growth structural reforms instead of relying on monetary and fiscal policy to boost growth.
"The debt finance growth model has reached its limit," said Schauble said at an event organized by the Washington-based Institute of International Finance alongside the Shanghai meeting. "We do not agree on a G20 fiscal stimulus package."
The IMF managing director, Christine Lagarde, who was attending the Shanghai meeting, urged policymakers to speed up the pace of reforms.
"We think they should go bold, they should go broad and they should go together," said Lagarde. Referring to monetary and fiscal policy and structural reforms, she said, "There has to be action on all fronts."
AP researcher Dong Tongjian in Beijing and AP Writer Erika Kinetz in Shanghai contributed.