Just hours after the Trump administration announced 10% tariffs on an additional $200 billion in Chinese exports, Chinese Premier Li Keqiang said the nation wouldn’t devalue its currency in order to make its exports more competitive.
Which, of course, doesn’t mean the yuan won’t fall in value if market forces push the Chinese currency lower.
“Recent fluctuations in the renminbi [yuan] exchange rate have been seen as an intentional measure, but that isn’t true,” Li said in a speech at the World Economic Forum on Wednesday. “China will by no means stimulate exports by devaluing the yuan.”
The onshore yuan rallied after Li’s speech to 6.8535 to the dollar.
The rally came on relief that the Chinese government won’t actively and rapidly push down the yuan.
The Chinese currency is down 8.5% against the dollar over the past five months. But that seems to be the result of strength in the dollar and fears that the Chinese economy is slowing rather than a reflection of moves by the People’s Bank.
Until the dollar moves into a significant downward trend (unlikely as long as the Federal Reserve is raising interest rates) and until fears of an economic slowdown in China dissipate, the yuan isn’t likely to move up.
Still the statement from Premier Li is good news for emerging markets and developing economies. At least they won’t, according to the Premier, have to face a wave of intentionally cheaper Chinese exports.
