Former central bank official says keeping yuan stable 'crucial'

BEIJING - It is crucial to maintain a basically stable exchange rate of the Chinese currency renminbi, or yuan, amid current circumstances, according to a former official of the country's central bank.

"Boosting exports by devaluating the yuan could bring possible short-term price advantages, but will not help companies improve products and their competitiveness," says a commentary published Tuesday in Economic Information Daily co-authored by Sheng Songcheng, former head of the Statistics and Analysis Department at the People's Bank of China, and Shen Xinfeng, an economic analyst.

Net export had a negative contribution rate to the country's GDP last year with the trade surplus narrowing, according to the article.

Besides, a weaker yuan will not help China's imports as the country's demand for imported hi-tech products and high-end services are relatively huge during the stage of economic transformation.

Keeping yuan basically stable will help ward off interference from speculation and avoid major fluctuations in the financial market to create favorable conditions for deepening the exchange rate reform, the article says.

Generally speaking, import and export enterprises want the exchange rate to be basically stable, which can help them avoid the interference of exchange rate fluctuations and focus on the production and operation of businesses, it says.

The authors believe the yuan will appreciate in the long-term given China's strong internal economic dynamics, huge growth potential and the country's adequate policy toolkit.

China has made it clear that it will not engage in beggar-thy-neighbor currency devaluation, and will continue to improve the exchange rate formation mechanism of its currency, and keep the exchange rate generally stable on a reasonable and balanced level to promote a stable global economy.

The central parity rate of the yuan strengthened 28 basis points to 6.8853 against the US dollar Tuesday, according to the China Foreign Exchange Trade System.