China and other key economies are ready to strengthen “policy-level coordination” toward balanced and sustainable growth in global business, a senior central bank official said on Sept 1.
G20 members agree with one another that they must “use all policy tools to support growth”, said Yi Gang, vice-governor of People’s Bank of China, in the run-up to the G20 Leaders Summit on Sept 4 and Sept 5 in Hangzhou, Zhejiang province.
By all policy tools, he was referring to monetary and fiscal policy and, in the long run, measures to boost structural reform of the international financial system, Yi said.
“This marks a milestone in the G20’s recent history of macroeconomic policy coordination,” he said.
At the same time, China stands with other G20 members in their opposition to competitive devaluation of currencies, and the country is committed to the yuan’s market-based exchange rate, he said.
Competitive devaluation offers “no hope” for solving the problems facing the world economy today, Yi stressed.
The level of the yuan’s exchange rate has remained by and large stable against other major currencies－more so than most reserve currencies－said Yi, adding that the yuan is also more stable compared with the currencies of many emerging market economies.
China is also willing to communicate and coordinate more closely with other major economies regarding the yuan’s exchange rate, he said.
However, with a wide policy tool kit from which to choose, each country has a flexible space to adopt policies according to their own circumstances, Yi noted.
He said China’s perspective is that macro policies can be effective in boosting sluggish demand in the short term, but tools for boosting supply-side reform would be more helpful in achieving long-term economic growth.
Commenting on China’s pledge to not engage in competitive devaluation, Lian Ping, chief economist with Bank of Communications, said it reflects China’s willingness to play the role of a responsible large economy.
“China is playing a leading role in helping the world avoid a war of currency depreciation,” he said.
Although a weaker currency could be somewhat helpful for a nation’s export business, its benefit to the overall economy would only be marginal, Lian said.
“China has more important goals to achieve. Considering those more important goals, not seeking a government-engineered depreciation of the yuan is a fully rational thing for China to do. It will bring about lasting benefits for the country and the world,” Lian said.