By Joyce Yu
Philadelphia, PA–Chinese central bank vowed to keep the yuan stable on Tuesday as the currency and the Chinese stock markets both slump amid intensified trade friction between the country and the United States, spurring speculations that the authorities are stepping up efforts to support the market.
In a written interview published on the website of the Chinese Central Bank, People’s Bank of China Governor Yi Gang said, “Recently the foreign exchange market has shown some volatility and we’re paying close attention to that.” “China will “keep the yuan exchange rate basically stable at reasonable and balanced level.”
Yuan has been weakening since mid-June, and dropped 3% against the dollar over the past two weeks. This coincided with not only a softer set of Chinese economic data, but growing US-China trade tensions. This has led to speculations that Yuan depreciation was a deliberate policy adjustment. But Morgan Stanley opined China is not using yuan depreciation as a tool in its trade conflict with the U.S., and will likely step in to stop any excessive decline.
The institution pointed out that China learnt the lesson in 2015 when devaluation of yuan led to capital outflows and expectations for continuous yuan declines. It proved that “active material depreciation” can endanger financial stability. The People’s Bank of China has already signaled that it’s on alert by setting the yuan’s reference rate on the strong side of what models had predicted last week.
Over to Chinese stocks market, Shanghai bourse rebounded on Tuesday from a two-year low after several mainstream media including the Securities Daily and Economic Daily called on investors not to panic over potential US-China trade war. “Intensifying trade frictions between China and the United States is a test that the Chinese economy inevitably had to experience during its rise,” the Economic Daily said. “We have long anticipated and prepared for this… The impact on the Chinese economy is within a controllable range.”
Despite some gains in mainland stocks market, Hong Kong Heng Seng index lost 1.41% on Tuesday. Hong Hong Kong listed China Mobile fell 2% after the U.S. National Telecommunications and Information Administration recommended that the Federal Communications Commission deny China Mobile’s seven-year old application to offer telecommunications services from within the United States on national security grounds.
In the NTIA filing, the world’s largest mobile phone operator indicated it didn’t intend to offer mobile service within the U.S. NTIA, however, said in its filing, “the deepening integration of the global telecommunications market has created risks and vulnerabilities in a sector replete with a broad range of malicious activities.”
