Premier Defends Yuan’s Performance Against Dollar

(Beijing) — Premier Li Keqiang said that China does not rely on currency devaluation to boost exports, adding that the yuan’s exchange rate will “remain generally stable.”

The yuan fell 6.5% against the dollar in 2016, but when compared with other currencies, the yuan stayed relatively strong, Li said Wednesday in response to a question posed by Caixin at a news conference at the end of the annual meeting of the National People’s Congress, China’s top legislature.

“The RMB has a solid presence in the international currency system, and the RMB exchange rate will remain generally stable,” Li said.

Beijing has taken a series of measures to curb the falling yuan, including scaling back the country’s holdings of U.S. Treasury bonds, selling dollars and buying yuan to bolster the Chinese currency’s value.

The country’s foreign exchange reserves bounced back to $3.0051 trillion in February after it fell below the $3.0 trillion psychological comfort level to $2.9982 in January. The previous time it was below $3 trillion was in February 2011.

A CCTV screen grab shows Caixin reporter Wu Hongyuran asking Premier Li Keqiang questions at a news conference on Wednesday in Beijing. Photo: CCTV

China still has the largest foreign reserves in the world, which is “way above the international standard” and “ample” to pay for imports and its short-term debt obligations, Li said.

On expectations of a weakening yuan, business and household capital flight has picked up, triggering authorities to step up efforts to contain capital outflows in recent months. For example, the central bank has tightened restrictions on Chinese companies’ investment overseas, required banks to strengthen scrutiny of individuals’ requests for foreign currency, and increased the cost of borrowing yuan in the offshore market to clamp down on short-selling of the Chinese currency.

Li stressed that scrutiny of individuals’ requests for foreign currency has long been mandated by Chinese rules and laws. The normal use of foreign exchanges by businesses, tourists and students is protected, he said.