Ruling out any drastic devaluation of currency to boost its trade, China reassured G20 Finance Ministers and central bank governors that Beijing has plenty policy tools to combat the slowdown of its economy which slipped below seven per cent last year.
RBI Governor Raghuram Rajan and Additional Finance Secretary Dinesh Sharma are taking part in the G20 meet which kicked off here last night.
In a video message, Chinese Premier Li Keqiang said that the world’s second-largest economy has the confidence to handle the complex economic situation at home and abroad. “The Chinese economy has great potential, resilience and flexibility, and we will capitalise on such strengths,” he said.
Yesterday’s gathering came amid weak economic growth worldwide and increasing volatility in the financial markets. The IMF predicted growth of 3.4 per cent for the world economy this year. Li called for G20 nations to stand together during the difficulties.
“When formulating macroeconomic policy, G20 members need to keep in mind not just their own growth, but should also watch for the spillover effects of their policies,” he said.
Continued turbulence in the Chinese stock market and yuan depreciation at the start of 2016 did little to disguise what could be a very difficult year ahead, putting the country’s economic policies and reform agenda in spotlight at the two-day meeting.
Significantly, the People’s Bank of China governor Zhou Xiaochuan has reassured the world that China would not drastically devalue its currency to boost its trade.
Near four per cent devaluation of yuan last year sent the world markets in tizzy. The devaluation following series of stock market crashes was reportedly aimed at boosting falling export revenues.
Speaking ahead of a G20 meeting of finance chiefs and central bankers here, Zhou, the longest-serving central bank governor among the Group of Twenty nations said China’s priority was to ensure the stable growth of its economy. Chinese currency in the recent month is depreciating steadily against US Dollar and currently trading around 6.50 per USD.
Zhou stated that there is no basis for continued weakness of the Chinese currency as the country’s economic fundamentals remain sound.
He also cited China’s current account surplus and foreign exchange reserves as solid support for the balance of international payments. There is no concern over China’s foreign exchange adequacy and China has the ability to make overseas payments, he said.