The Chinese yuan is expected to move in both directions as the economy stabilizes following last week’s devaluation, People’s Bank of China (PBOC) Chief Economist Ma Jun (馬駿) said in an e-mailed statement yesterday.
A more market-oriented pricing mechanism for the yuan is expected to help avoid excessive deviation from the equilibrium level and significantly reduce the possibility of sudden fluctuations, Ma said, adding that the economy is expected to grow about 7 percent this year.
The yuan halted a three-day slide on Friday following its first major devaluation since 1994 after the PBOC said it would intervene to prevent excessive swings. Policymakers are trying to balance the need for financial stability with a desire for stronger exports and the yuan’s inclusion in the IMF’s basket of reserve currencies.
“If we want to evaluate the yuan’s mid-term trend, it’s more important to analyze the fundamentals of the economy, which has shown signs of stabilization and recovery,” Ma said in the statement. “Even if the central bank needs to intervene in the market in the future, it could be either way.”
China’s decision on Tuesday to allow markets greater sway in setting the currency’s level triggered the biggest sell-off in 21 years and roiled global markets.
The current exchange rate is now more consistent with economic fundamentals, and there is no need to adjust it to boost exports, PBOC Deputy Governor Yi Gang (易綱) said at a press conference on Thursday. The PBOC has exited regular intervention, and will act when the market’s volatility is excessive, Yi said.
Under the PBOC’s new system to set the daily fixing, market makers who submit contributing prices must consider the previous day’s close, foreign-exchange demand and supply, as well as changes in major currency rates. The IMF, which is considering adding the yuan to its basket of reserve currencies, said the mechanism should allow market forces a greater role.
China’s monetary easing since the end of last year, recovering housing prices and sales as well as local debt swap is set to help support the economy, Ma said in yesterday’s statement. Last week’s fluctuation is temporary and has been stabilized, he said.
The nation has no intention, nor needs to be involved in a currency war and the driver of future economic recovery is expected to come from domestic consumption, he said.
EXTRATERRITORIAL REACH: China extended its legal jurisdiction to ban some dual-use goods of Chinese origin from being sold to the US, even by third countries Beijing has set out to extend its domestic laws across international borders with a ban on selling some goods to the US that applies to companies both inside and outside China. The new export control rules are China’s first attempt to replicate the extraterritorial reach of US and European sanctions by covering Chinese products or goods with Chinese parts in them. In an announcement this week, China declared it is banning the sale of dual-use items to the US military and also the export to the US of materials such as gallium and germanium. Companies and people overseas would be subject to
TECH COMPETITION: The US restricted sales of two dozen types of manufacturing equipment and three software tools, and blacklisted 140 more Chinese entities US President Joe Biden’s administration unveiled new restrictions on China’s access to vital components for chips and artificial intelligence (AI), escalating a campaign to contain Beijing’s technological ambitions. The US Department of Commerce slapped additional curbs on the sale of high-bandwidth memory (HBM) and chipmaking gear, including that produced by US firms at foreign facilities. It also blacklisted 140 more Chinese entities that it accused of acting on Beijing’s behalf, although it did not name them in an initial statement. Full details on the new sanctions and Entity List additions were to be published later yesterday, a US official said. The US “will
TENSE TIMES: Formosa Plastics sees uncertainty surrounding the incoming Trump administration in the US, geopolitical tensions and China’s faltering economy Formosa Plastics Group (台塑集團), Taiwan’s largest industrial conglomerate, yesterday posted overall revenue of NT$118.61 billion (US$3.66 billion) for last month, marking a 7.2 percent rise from October, but a 2.5 percent fall from one year earlier. The group has mixed views about its business outlook for the current quarter and beyond, as uncertainty builds over the US power transition and geopolitical tensions. Formosa Plastics Corp (台灣塑膠), a vertically integrated supplier of plastic resins and petrochemicals, reported a monthly uptick of 15.3 percent in its revenue to NT$18.15 billion, as Typhoon Kong-rey postponed partial shipments slated for October and last month, it said. The
COLLABORATION: The operations center shows the close partnership between Taiwan and Japan in the field of semiconductors, Minister of Economic Affairs J.W. Kuo said Tokyo Electron Ltd, Asia’s biggest semiconductor equipment supplier, yesterday launched a NT$2 billion (US$61.5 million) operations center in Tainan as it aims to expand capacity and meet growing demand. Its new Taiwan Operations Center is expected to help customers release their products faster, boost production efficiency and shorten equipment repair time in a cost-effective way, the company said. The center is about a five-minute drive from the factories of its major customers such as Taiwan Semiconductor Manufacturing Co’s (TSMC, 台積電) advanced 3-nanometer and 2-nanometer fabs. The operations center would have about 1,000 employees when it is fully utilized, the company