China will not start competitive devaluation of its currency to stimulate exports

September 19, 2018 9:49 amComments Off on China will not start competitive devaluation of its currency to stimulate exportsViews: 10

China prime MinisterChina will not start competitive devaluation of its currency to stimulate exports. This was stated by Chinese Prime Minister Li Keqiang after another episode of the escalating trade war between Beijing and Washington. Speaking at an event at the World Economic Forum, he did not comment on the growing tensions, but pointed out that the deliberate devaluation of the yuan was “groundless”.

“One-day devaluation of the yuan brings more damage than benefits to China”, said Li Keqiang, adding that the country would never rely on its cheap currency to boost exports.

In his words, Beijing will not do that to pursue “weak profits” and “a few small bundles”. Li Keqiang also pointed out that the global multilateral trading system must be respected, and unilateral trade actions would not solve existing problems.

His comment stimulated the Chinese yuan, which lost nearly 9% of its value since mid-April due to trade war with the United States.

On Tuesday, Beijing said that introduces duties on US imports worth 60 billion USD in response to the measures taken by the US authorities for tariffs on Chinese goods with annual turnover of 200 billion USD. So far, the two countries have imposed reciprocal customs duties on goods for 50 billion USD.

The new US tariffs will enter into force on September 24 and will amount to 10%, but later this year will reach 25%. Bank of America Merrill Lynch predicts a decline in China’s Gross Domestic Product (GDP) by 0.5 percentage points in 2019 to 6.1%.

Despite another episode in the trade war, the investors were relieved that the escalating tension was not as serious as expected. On Tuesday, the US markets ended the stock market with strong growth, and on Wednesday Asian exchanges were also on green territory.

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