Chinese Premier Li Keqiang said he wants to avoid a currency war as he sought to soothe global concern about the nation’s devaluation of the yuan and its slowing economy.
China has been “wrongly criticized” for its management of the currency and doesn’t want to use depreciation to boost exports, Premier said Wednesday at the World Economic Forum’s “Summer Davos” meeting in China.
Li told: “We won,t want to stimulate exports through depreciation. China will not want to see any currency wars. Currency wars would only hurt China.”
Growth is stabilizing and employment data show that the world’s second-largest economy is operating in a reasonable range. As long as there’s sufficient employment, incomes expanding in tandem with economic output and an improving environment, China can accept such growth as it had in the first half, Li said.
Li’s plan to keep growth about 7 percent this year is at risk after a stock market rout and sluggish global demand. Downward pressure on the economy has increased, with exports falling 5.5 percent in August from a year earlier and the nation’s official factory gauge falling to a three-year low.
“The People’s Bank of China has been intervening in the hope of convincing global markets that the renminbi will not weaken,” said Mark Williams, chief Asia economist at Capital Economics Ltd. in London.
“China probably feels it deserves some credit for the stability of its currency against the dollar at a time of a lot of nervousness in global financial markets.”
Li said “persistent depreciation of the renminbi will not be conducive to China’s efforts to internationalize the renminbi,” which policy makers are pushing to become a new reserve currency like the dollar, yen, euro and pound. He added that the yuan’s real effective exchange rate has risen since he took office two years ago.
The central bank’s buying of yuan and selling of dollars to defend against a rapid currency depreciation cut foreign-exchange reserves by a record $93.9 billion last month.
Li said the structure of the economy is trending in a positive direction as the government promotes new drivers of growth and continues with reform and restructuring efforts. He said China can maintain mid- to high-speed growth.
Market gyrations have presented Li with new challenges this year as the Shanghai Composite Index doubled in less than a year to a seven-year high in June, then plunged 43 percent in two months.
“China is not a source of global financial risk,” Li told.