U.S., China Have Reached Consensus on Many Vital Issues, Yi Says
Negotiators have reached consensus on many crucial issues
Reserve-ratio tool to evolve to 3-bracket system, Yi says
March 9, 2019
China and the U.S. have reached consensus on many “crucial” issues and and have discussed the need to observe the “autonomy” of each other’s monetary policy, People’s Bank of China Governor Yi Gang said.
“The two sides discussed issues surrounding the yuan including the need to abide by previous commitments made by Group of 20 nations not to engage in competitive depreciation and to communicate closely on currency issues,” Yi said during a press conference in Beijing Sunday during the annual National People’s Congress. He didn’t say on which issues they had reached consensus.
The negotiators also discussed the importance of a market-orientated foreign exchange mechanism and the need to disclose information to International Monetary Fund standards, Yi said. He has been part of the Chinese team at the trade talks.
The issue of currency manipulation has become part of the ongoing talks to solve their trade confrontation, with the U.S. pushing for a pledge by China to not devalue its currency as a way to gain competitiveness or offset the effect of tariffs. China has said that any deal to end the trade spat should be “two way, fair and equal.”
The PBOC has “basically exited” daily intervention in the foreign exchange market, Yi said, reiterating the existing intention to keep the yuan “basically stable” at “reasonable equilibrium.” China will “never” use the exchange rate for competitive purposes, to increase exports or to solve trade disputes, he said.
The talks on foreign exchange have been “very meaningful,” and the yuan exchange rate formation mechanism is in line with G-20 standards and is decided by the market, Yi said, adding that he expects to reach more consensus in discussions with the U.S. on this. He didn’t say what he meant by that.
Looking at the comments as a whole, including Yi’s reference to continuing to use counter-cyclical measures, “it seems to me that there will not be obvious change on the yuan mechanism,” said Iris Pang, a Hong Kong-based economist with ING Bank NV.
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