Chinese central bank deputy governor takes aim at speculation of further yuan weakness

A top Chinese economic official took aim over the weekend at speculation of a further weakening in the country's currency, the yuan, and the accuracy of the data it publishes on foreign reserves.

Speaking on Sunday, People's Bank of China deputy governor Yi Gang reiterated Beijing's stance that there was no basis for a continuous depreciation in the value of the yuan's exchange rate when measured against a basket of currencies.

At a briefing for reporters during the annual session of the Chinese National People's Congress, Yi said,
"the stability I am talking about here refers to stability against a basket of currencies. There is no basis for continuous yuan deprecation pressure," Market News International reported.

He added that in the medium-to-long term the focus would return to the currency's fundamentals.

Yi also believed some capital outflows were inevitable as past inflows reversed direction.

"A certain decline in forex reserves is within my expectation," he said.

Yi also appeared to counter some analysts' assertions that the true level of the country's foreign exchange reserves which were readily available, or liquid enough, to finance those outflows, was lower than the figures reported by the PBoC.

If true that might mean the yuan could come under greater pressure sooner, if capital outflows were sustained at recent levels.

"This liquidity classification is conducted strictly according to the IMF's standard. So the official foreign exchange reserves data that we currently report definitely meets liquidity standards. Those non-liquid assets definitely aren't included in what we report."

The Deputy Governor, who until January was also the head of the country's forex regulator, SAFE, also disclosed that China's foreign reserves included assets denominated in US dollars, euros, yen, sterling and those of developing economies.

A more precise idea of the exact composition could be gleaned from studying China's foreign trade patterns, foreign investment and external payments, he said.

China was scheduled to publish data on its official foreign exchange reserves for February on 7 March.

At the end of January they were pegged at 3.2trn yuan.