China promises not to launch devaluation of the yuan

Baku. 29 February. REPORT.AZ/ Economists linked to the Chinese government say that authorities will not be looking to devalue the yuan following Japan's decision to employ negative interest rates.

Report informs referring to the Kommersant, finance ministers and central bankers from the Group of 20 rich and developing countries promised at their meeting Saturday in Shanghai to use "all tools" at their disposal to bolster weak global growth, which is at its lowest level in two years. They also vowed not devalue their currencies to boost exports. They declared that the global economy is healthy, but also acknowledged they need to do more to boost its growth, without announcing any joint plan of action.

The Chinese government would not be baited into a devaluation. "China will definitely not join in this currency war," said Xu Hongchai, an economist linked to China's National Development and Reform Commission. "We want to maintain a stable currency policy and we have confidence in the Chinese economy."

Of course, Beijing's decision is likely influenced in no small part by the record levels of money being pulled from the country by investors. Were Beijing to embark on further devaluation of the yuan, it's likely that even more capital would flee China.

Capital Economics, an independent economic research firm, forecasts that the yuan is already set to hit 6.8 against the dollar by the end of 2016 compared with its current value of around 6.57.

"I don't think you are seeing Asian countries fighting to weaken their currencies against each other; it's more a passive devaluation driven by the strength of the US dollar," said economist Julian Evans-Pritchard.

China's foreign exchange reserves fell by more than $US500 billion in 2015 to $US3.3 trillion, the first annual drop since 1992.