August 22, 2019
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IMF says Chinese central bank intervened little in yuan exchange rates

 Chinese yuan or renminbi (RMB) notes and coins in Beijing, China, Aug. 5 2019. EPA-EFE FILE/ROMAN PILIPEY

Chinese yuan or renminbi (RMB) notes and coins in Beijing, China, Aug. 5 2019. EPA-EFE FILE/ROMAN PILIPEY

Beijing, Aug 10 (efe-epa).- The International Monetary Fund said Saturday that the People's Bank of China has made few interventions on the yuan's exchange rate in recent years.

In its report on the performance of the Chinese economy over the last year, the IMF said that after the devaluation of the renminbi (the yuan's official name) between June and August 2018, the currency remained generally stable compared to other major international currencies.

This report comes in the same week in which the yuan, for the first time since 2008, crossed the psychological barrier of seven units to the dollar.

Several analysts are of the opinion that the PBOC deliberately allowed this devaluation in response to United States President Donald Trump's announcement of fresh 10 percent tariffs on $300 billion worth of Chinese goods.

The depreciation of the yuan didn't sit well with the US, whose Treasury Department officially designated China as a currency manipulator, something Trump had been insisting on for years.

As per US law, under this move, Washington and Beijing must now negotiate directly or through the IMF to address alleged irregularities in Chinese currency exchange rates.

However, Chinese authorities and the country's government-controlled press have expressed outrage over the accusation, making it highly unlikely that Beijing would be willing to negotiate the issue.

And while the IMF report covers until July 31 this year, it concludes that the effective real exchange rates were compliant with the basic rules.

However, the document underlined that China should be more transparent in explaining the movements of the yuan and that the authorities should allow greater flexibility in the exchange rate.

Currently, the PBOC sets a benchmark rate every day (for example, it was 7.0136 yuan to the dollar on Friday) and allows the onshore rate – the one quoted in local markets – to fluctuate a maximum of 2 percent.

However, the rate for international investors is listed on offshore markets such as Hong Kong and is not regulated by the PBOC.

China's state media was quick to underline the findings of the IMF report. The Xinhua agency quoted Columbia University economics professor Jeffrey Sachs saying that the IMF report made it clear that there had been no currency manipulation by Beijing. EFE-EPA

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