Central bank deputy governor says yuan remains a stable currency

The central bank will continue to adopt macro-prudential measures to stabilize expectations in the foreign exchange market and keep the yuan at a reasonable, equilibrium level, a deputy governor said on Friday,

Pan Gongsheng, a deputy governor of the People's Bank of China, told a news briefing that the country's healthy economic fundamentals, stable macro leverage rate and ample foreign reserves will provide a pillar to keep the yuan basically stable.

Pan's comment came as the yuan weakened further against the US dollar early on Friday when the central bank set the band for onshore trading of the currency weaker than 6.95 yuan per dollar for the first time since early 2017.

Pan, who is also head of the State Administration of Foreign Exchange, said China will not resort to competitive depreciation of the yuan, nor will the country use the currency as a tool to cope with outside turbulences such as trade frictions.

The recent weakness of the yuan has been driven by the US interest rate hikes, a strong dollar, volatility in the international financial market and trade frictions with the US, he noted.

Despite its recent weakness, the yuan is still a stable currency in comparison with currencies from both developed economies and emerging economies, he said.

He added that the impact of the ongoing trade frictions between China and the US on the foreign-exchange market and cross-border capital flows is generally under control.

Pan said the country is aiming to further boost lending to private and small businesses as the central bank established a plan to promote the bond issuances of private businesses.

He reckons that there is now decreasing risk appetite for private businesses due to incidents of debt defaults, which has also affected the fundraising of private businesses.

For private businesses faced with liquidity problems, the plan will prioritize support to those with broad markets and leading technologies, he said.

Zhou Xuedong, head of the financial stability bureau at the PBOC, said at the news briefing that the country has made major breakthroughs in resolving shadow banking risks.

The scale of the country's asset management businesses fell slightly by the end of August, and the momentum of quick growth in the wealth management business has been under control, he said.