China has no plans to devalue its yuan to boost exports and will keep its exchange rate stable, the country’s top economic official said Wednesday.
Premier Li Keqiang’s comments follow heavy spending by the central bank to shore up the currency.
U.S. President Donald Trump has repeatedly vowed to declare that Beijing improperly manipulates its exchange rate, a step that opens the way to possible trade sanctions.
“China has no intention to devalue its currency to boost exports,” Li said at a news conference following the annual legislative session. He said the exchange rate “will remain generally stable.”
Economists say that while Beijing suppressed the yuan’s value in the previous decade, more recently market pressures are weakening the currency against the dollar and it would fall further without central bank intervention.
The People’s Bank of China has been spending tens of billions of dollars a month to keep the yuan in line with the dollar after expectations it would decline led investors to move money out of the country.
The bank’s foreign currency reserves have declined by almost $1 trillion from a peak of $3.99 trillion in June 2014.
The yuan could face further downward pressure if the U.S. Federal Reserve goes ahead with a widely anticipated interest rate hike. That would increase the return on U.S. bonds and other financial assets, drawing more money out of China.
The premier said Beijing will push ahead with market-oriented reforms of its mechanism for setting the yuan’s exchange rate. The band within which the yuan is allowed to fluctuate each day has been gradually widened but Beijing regularly intervenes to guide the currency’s movement.