China’s Ministry of Commerce released its latest “Research Report on Sino-US Trade Relations” on May 25 2017, asserting that Chinese policymakers will refrain from engaging in competitive currency devaluation.
According to the report there is no foundation for long-term depreciation of the RMB, and that the exchange rate would gradually tend towards a “new balance.”
While China’s central bank has provided US dollar liquidity support to markets when necessary, MOC said that this was for the purpose of preventing excess short-term volatility in RMB exchange rates, not with a view to impeding effective adjustments to the balance of payments, stimulating exports via competitive currency devaluation, or preventing normal adjustments to the exchange rate as a result of market factors.
The report said while maintaining the fundamental stability of the RMB compared to a basket of currencies, China would increase the floating flexibility of the RMB’s relative to the US dollar in both directions, which would be of benefit to both China and the global economy.
The authors of the report called for the use of “dialogue for the appropriate handling of economic and trade frictions” between China and the US, and said that the bilateral economic and trade relationship was characterised by mutual interest.