Currency adjustment 'due to market forces'

China's central bank vice governor Yi Gang, head of China's State Administration of Foreign Exchange (SAFE), answers a question at a news conference during the annual session of the National People's Congress (NPC), the country's parliament, in Beijing, March 12, 2015.[Photo/Agencies]

The sudden depreciation of the yuan this week is a result of a market-oriented exchange rate regime and is not a move simply to stimulate exports, a top central bank official said on Thursday.

"It is a myth to say the government will cut the yuan's value by 10 percent to promote exports," said Yi Gang, the deputy governor of the People's Bank of China, who is also in charge of the State Administration of Foreign Exchange.

Reuters reported on Wednesday that an anonymous official said top policymakers would like to see a 10 percent depreciation of the yuan as a measure to strengthen exports and stabilize overall economic growth.

"It is complete nonsense," said Yi. "China doesn't need to boost exports through exchange rate adjustments, since exports are still sound and there is a huge trade surplus."

Yi said the cuts were determined mostly by the market, because currency reform is letting the previous trading day's closing price, the movements of the world's major currencies, and the demand and supply of the yuan in the market determine its value.

"The central bank has already withdrawn from regular intervention," Yi said.

Ding Zhijie, head of the School of Finance at the University of International Business and Economics, said that the reform will not lead to a persistent depreciation, since sound economic fundamentals are capable of supporting a strong currency.

"Sharp fluctuations only last temporarily, and the market will move to a more rational price of the yuan, as the previous distortions from the bank's interventions have been removed," said Ding.