China vows to keep yuan's value stable

Agence France-Presse

Posted at Feb 18 2009 02:12 PM | Updated as of Feb 18 2009 10:21 PM

BEIJING - China will keep its currency stable, a top foreign exchange regulator said Wednesday, as the government rushed to stamp out rumours that Beijing could allow the yuan to weaken.

"My answer to the question of where the yuan's exchange rate will go is that it will be kept basically stable at a reasonable and balanced level," said Deng Xianhong, deputy administrator of the State Administration of Foreign Exchange.

"There will not be any major ups and downs," he told reporters.

"It will not only benefit China and the rest of the world but also help our efforts to tackle the international financial crisis."

The yuan has long been a source of friction with China's major trading partners led by the United States and Europe, who accused Beijing of keeping the yuan's value artificially low, giving its exporters an unfair advantage.

China scrapped the yuan's peg to the dollar in July 2005 and the Chinese currency has since appreciated by around 18 percent.

However, depreciation talk flared up December 1 when the yuan posted its biggest single day fall against the dollar since it was allowed to trade within a narrow band in July 2005.

Those concerns have been fuelled by slumping Chinese exports, which in January dropped by 17.5 percent from the same month last year, the steepest decline in more than a decade.

A Chinese media report on Tuesday quoted Zhang Xiaoqiang, vice minister of the top economic planning agency, the National Development and Reform Commission, as saying that the yuan could weaken to as low as seven to the dollar.

But the commission on Wednesday rushed to deny the comments, saying they were "totally fabricated".