China’s central bank says the yuan is strong and stable. On Nov 27, the deputy governor of the People’s Bank of China, Yi Gang, told Xinhua News Agency, the yuan’s forex rate volatility is the result of a firming US dollar in recent weeks. The US Fed’s imminent rate hike, Britain’s vote to leave the European Union, and Egyptian pound’s free floating rate are all contributing to the rising US dollar. The yuan has softened to the US dollar, but has appreciated against several major currencies, including the Japanese yen, euro, and British pound.
Yi said the Chinese foreign exchange system has been referring to the basket of currencies since 2003. He pointed out that over 200 economies are trade partners with China, while only 14 percent of the trade volumes are with the US. He said it’s better to reflect the yuan’s strength via comparison to a basket of currencies than pegging to the US dollar only.
Yi also said China has the largest foreign reserve worldwide, or 30 percent of the world’s total. He said it’s sufficient to cover the needs of paying off debt, asset management, and overseas investment.