Off the wire
• China removes regulation on loan-to-deposit ratio  • China adopts law revision to spur exploitation of academic inventions  • 1st LD: China confirms prisoner amnesty for WWII anniversary  • Urgent: Provincial religious official killed in attack in S. Afghanistan  • China passes law amendments to empower local legislatures  • Negotiations fail to end violence in Syrian flashpoints  • News Analysis: Philippine stocks rebound as country's GDP grows by only 5.6 pct in second quarter  • China passes law amendments on air pollution control  • Saudi-led warplanes strike Yemen's capital  • China adopts Criminal Law amendments, repealing crime of sex with underage prostitutes  
You are here: 　 Home

China plays down yuan depreciation's trade impact

Xinhua, August 29, 2015 Adjust font size:

The Ministry of Commerce (MOC) has defended China's overhauling of its exchange rate formation mechanism, a move which has seen a significant drop in the Chinese yuan's central parity rate against the U.S. dollar.

There has been concern in the international market over the connection between the yuan's depreciation and China's efforts to boost exports.

However, the MOC said in a statement late on Friday night that the drop, of 4.6 percent in three days after the adjustment on Aug. 11, was "a normal adjustment" and will have limited impact on foreign trade.

Since late last year, there had been a significant discrepancy between the yuan's central parity rate and the spot trading rate. The new quotation regime of the central parity helped narrow the gap and allowed the market to play a bigger role in determining the yuan's exchange rates, the statement said.

On Aug. 11, China's central bank ordered that daily central parity quotes reported to the China Foreign Exchange Trade System before the market opens should be based on the closing rate of the inter-bank foreign exchange market the previous day, supply and demand, and price movement of major currencies.

After dipping 4.6 percent in the following three days, the yuan's central parity against the dollar has since stabilized.

"Under a global value chain, there is a downstream and upstream industrial division and international trade within a single industry is very common. So the boosting effect on exports arising from a currency depreciation will be shared by various economies and thus weakened," according to the MOC.

It said the impact of a one-off rate adjustment on Chinese exports will be limited because around half of it is accounted for by processing trade, in which products' raw materials are imported to China and the finished products are re-exported after assembly.

There is no basis for continued depreciation of the yuan, and the exchange rate will be kept "basically stable at an adaptive and equilibrium level," the statement also said. Endi