China: No need to depreciate yuan after IMF move

marketwatchDecember 1, 2015
Lindling Wei

BEIJING–China will keep its currency at a “reasonable” level and sees no need for depreciation, a top central-bank official said.

The comments from People’s Bank of China Vice Governor Yi Gang came hours after the International Monetary Fund added China’s yuan to its basket of reserve currencies, known as Special Drawing Rights, or SDR. The move prompted speculation that China would let the currency drift lower.

Speaking at a news conference on Tuesday, Mr. Yi said the central bank doesn’t see reason for depreciation, pointing to China’s economic strength and ample foreign-exchange reserves.
“If the worry is the renminbi would depreciate sharply after its inclusion in the SDR, there’s no need for that,” Mr. Yi said. Renminbi is an alternative name for the yuan.

Mr. Yi said China’s long-term goal is to allow a “clean float” of the yuan — meaning the central bank will stop intervening in currency markets to control the yuan’s value. For now, the PBOC will continue the interventions only to curb excessive fluctuations in the currency, Mr. Yi said.

“It will be a gradual process,” he said. “It’s important to keep the renminbi at a reasonable and equilibrium level.” Mr. Yi declined to specify what level that is, while adding it should be determined by market forces.

China shocked markets in August with a surprise depreciation of the yuan. Chinese officials said the move was part of an effort to make the yuan rise and fall based more on market forces.

The IMF’s decision, which is set to go into effect in October, would add the yuan to a basket of currencies that includes the U.S. dollar, the euro, the British pound and the Japanese yen. The move, while largely symbolic, is seen as potential impetus for China to continue on a path of freeing up its tightly controlled financial system.

Write to Lingling Wei at lingling.wei@wsj.com