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China will not devalue yuan to spur exports: Central bank chief

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Governor of central bank says China will not use exchange rate to boost exports

BEIJING China has gone to great lengths to support its currency and would not devalue the yuan to spur exports or combat trade frictions, the governor of the central bank, the People's Bank of China (PBOC) said yesterday.

Speaking on the sidelines of China's annual parliamentary session, Mr Yi Gang said Washington and Beijing had discussed exchange rates in recent trade talks and reached a consensus on many "crucial" issues.

US President Donald Trump has long accused Beijing of manipulating its currency to gain a trade advantage and Washington has been seeking assurances on the exchange rate in the ongoing trade talks between the two nations.

"Let me stress here that we will never use the exchange rate for the purpose of competition, nor will we use the exchange rate to increase China's exports or as a tool in handling trade frictions," said Mr Yi.

"We have committed not to do this," he told reporters.

He noted that the US Treasury Department had declined many times to label China a currency manipulator in its semi-annual report on international exchange rates, AFP reported.

Beijing and Washington have been locked in a bruising trade war since last year, imposing tit-for-tat tariffs on more than US$360 billion (S$494 billion) in two-way trade, which has left global markets reeling.

"The two sides reached consensus on many crucial and important issues," Mr Yi said, without specifying which issues.


China's banking regulator told reporters earlier this week that the two sides would reach a consensus on the exchange rate and indicated it would not be a sticking point in the way of a larger trade agreement.

In the past three or four years the exchange rate had been under market pressure to depreciate, Mr Yi said, adding that Beijing had used up US$1 trillion of China's foreign currency reserves to stabilise the currency.

Mr Yi also pledged to further support the slowing economy by spurring loans and lowering borrowing costs, Reuters reported.

This follows data that showed a sharp drop in last month's bank lending due to seasonal factors.

The central bank is widely expected to ease monetary policy further this year to encourage lending, especially to small and private firms vital for growth and job creation.

The central bank's "prudent" monetary policy will emphasise counter-cyclical adjustments, Mr Yi said, using a phrase that implies the need to fight an economic slowdown.

He said: "The global economy still faces some downward pressure and China faces many risks and challenges in its economy and financial sector."