‘No basis’ for continued devaluing of yuan

There is no basis for continued depreciation in the Chinese yuan, the country’s premier Li Keqiang was quoted by state television as saying yesterday.

“Currently, there is no basis for continued depreciation in the renminbi yuan, which is able to stay at a reasonable and balanced level,” Mr Li said.

China’s economic fundamentals had not changed and the government could achieve its main economic targets for the year, he added.

The central bank shocked global markets by devaluing the yuan by nearly 2% on August 11.

The People’s Bank of China called it a free-market reform but some saw it as the start of a long-term yuan depreciation to spur exports.

Some Chinese agencies involved in economic affairs have begun to assume in their research that the yuan will weaken to seven to the dollar by the end of the year, said sources.

The research further factors in the yuan falling to eight to the dollar by the end of 2016, according to the sources.

Those projections suggest a depreciation of more than 8% by the end of this year and about 20% by the end of 2016.

They were adopted after the currency was devalued this month and compare with analysts’ forecasts for the yuan to reach six and a half to the dollar by the end of this year.

The rate suggests China may allow the yuan to fall further after a depreciation in which the currency was allowed to weaken by nearly 3% earlier this month.