Tremors in overseas markets and weakness in partner economies have weighed on the Asian giant, a main driver of the world’s economic growth, and the globe’s largest trader in goods. Along with it he added that weak trade data “hints that it does not make too much sense for China to maintain a strong currency”.
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China reported its weakest economic growth in 25 years for 2015, and on Monday it released figures showing imports and exports both fell more sharply than expected in January compared with a year earlier.
China’s foreign exchange reserves dropped by 99.5 billion US dollars from December to 3.23 trillion USA dollars at the end of January, the central bank said Sunday.
Economists polled by Reuters had expected new yuan loans to surge to a near seven-year high of 1.8 trillion yuan in January, tripling from 597.8 billion yuan in December.
On Wednesday, a spokesman for the China’s commerce ministry said that the country was not witnessing any signs of capital flight and that there was no basis for continued depreciation of the yuan, though traders and economists believe it will remain under pressure as long as economic indicators fail to improve.
The spike in new loans in January also could be due to Chinese companies making early repayments of their foreign-denominated loans and bonds to reduce their currency exposure after the yuan weakened, analysts say.
The yuan had its biggest one-day advance since a peg to the United States dollar was scrapped more than a decade ago, as the currency caught up with a decline in the greenback during the holiday.
However, despite the upbeat performance in Asia, the 11.20% fall in China’s January exports and 18.80% drop in January imports continue to outweigh.
The disappointing trade figures sparked some investors to raise more questions about the future of the yuan. Japanese stock posted their highest gain since last September as Japanese Nikkei soared 7.16 percent ended up at 16022.58 and TOPIX index gained 8.02 percent closed at 1292.3.
Indeed, the People’s Bank of China (PBOC) took the opportunity of the USA dollar’s recent decline to fix its yuan at its highest in over a month on Monday CNY=SAEC, hoping to deflect speculation about a possible devaluation.
“The central bank will likely maintain yuan stability in the short term, so yuan depreciation is no longer a major risk the market is facing right now”.
However, Mr Zhou said China would not tighten its capital controls as a result.
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Today’s data points to a sharp acceleration in credit growth going into 2016, Julian Evans-Pritchard at Capital Economics, said.
