China's market-oriented reforms help promote global growth

BUENOS AIRES -- China's recent market-oriented economic reforms, including devaluing its currency and cutting interest rates, help to keep the domestic economy growing and by extension, the global economy, a top Chinese envoy said.

Wang Liang, the charge d'affaires at the Chinese embassy in the Argentine capital Buenos Aires, told Xinhua about the necessity of the reforms launched earlier this month, and the turbulent way international stock markets reacted -- or overreacted.

"Both in the past and today, China has had to handle the pressure of an excessively overvalued yuan tied to a basket of currencies," said Wang, adding that the present "fluctuation in its value, in keeping with market supply and demand, represents a new normalcy."

While "China doesn't need to devalue the yuan to spur its exports and guarantee the economy moves forward," said Wang, it does need to implement the necessary monetary policy adjustments and reform measures to ensure continued growth.

"The sustainable growth of China's economy is its biggest contribution to the world economy and neighboring countries," Wang said.

As China's economy evolves, so must the government's policies, said the envoy, referring to the country's transition from an export-driven to a consumer-driven economy, what Chinese officials call "the new normal."

"Unless it adapts better to its new economic normalcy and maintains financial stability through market-oriented reforms, China will not be able to increase its imports, nor its investments abroad, much less make an even greater contribution to the world economy," Wang said.

Talking about the source of instability of the global financial markets, the official said, "the biggest uncertainty stems from a possible interest rate increase by the US Federal Reserve and the indebtedness and growth outlooks of developed countries, such as Japan and those in Europe."

"China is known as a manufacturing powerhouse, as opposed to a financial powerhouse, as the yuan has yet to become a reserve currency. As such, the spillover effect of the yuan's exchange rate fluctuation cannot be compared with that of the US dollar," Wang said.

On Aug 11, the People's Bank of China announced a more flexible currency exchange rate that sparked a 1.9-percent depreciation of the renminbi versus the US dollar. The move was followed by a cut in interest rates and the injection of 150 billion yuan ($23.4 billion) to ensure liquidity.

"The turbulence in international markets had some impact on China's economy," including a sharp dip in the Shanghai Stock Exchange, Wang said.

Still, "the foundation of the country's economy remains stable (and) the economy is advancing reasonably. There's room for growth in innovation, as there is in domestic demand, which today is the engine for growth," he said.

"China is capable of reaching its annual economic development target thanks to the measures put in place to stabilize its growth," the official said.