The People's Bank of China has responded to criticism regarding the management of the yuan's exchange rate and has reiterated that the country "has no need or intention to gain competitive trade advantages through the devaluation of its currency."
In a text released this Thursday on the central bank's website, the monetary authority admits that the yuan's quotation attracts significant attention due to its influence on financial markets and points out that the debate "has intensified recently."
The agency recalls that China applies a managed floating exchange rate regime, based on market supply and demand and referencing a basket of currencies. In this way, it is market forces that play a key role in determining the value of the yuan, which has fluctuated in both directions over the past two decades and has gone through several cycles of appreciation and depreciation since 2010.
According to the entity, the advancement of Chinese foreign trade is due to the improvement of its industrial competitiveness on a global scale after more than forty years of reforms and opening up, supported by a vast internal market, a complete industrial chain, and a solid infrastructure framework, along with abundant highly skilled labor and a constant capacity for R&D and innovation.
"Empirical evidence does not suggest that the appreciation of the yuan in the past has negatively affected China's trade expansion, nor that depreciation has contributed to an increase in exports," emphasizes the central bank.
In this context, it recalls that, although the yuan appreciated against the dollar by 21% between 2005 and 2008, by 10% between 2010 and 2014, and by 9% between 2020 and 2021, China's share in global exports increased by 2.4, 2.8, and 1.7 percentage points in those periods. In contrast, its participation decreased in 2016 and 2022 despite the fact that the Chinese currency depreciated against the US dollar.
At the same time, the People's Bank of China considers that, in recent years, the country's foreign trade has become much less sensitive to exchange rate fluctuations, which represents a significant structural change. In its view, exports have shifted from focusing on low-end labor-intensive products to encompassing a much broader portfolio of mid-range and high-end goods.
"Chinese exporters are no longer mere price takers. They are now deeply integrated into global supply chains and can share the costs of exchange rate fluctuations with supplying and distributing companies," explains the institution.
"China is a responsible country. It has never resorted to competitive currency devaluation or to the depreciation of the yuan to boost exports and counter strong external crises in the past," states the central bank, which recalls that, during the global financial crisis of 2008, many currencies collapsed against the dollar, while the yuan remained relatively stable.
It also highlights that in recent years, although most currencies other than the dollar have faced strong downward pressure due to the trade war and the aggressive rate hikes by the Federal Reserve, the People's Bank of China (PBOC) has made "great efforts" to prevent excessive depreciation of the yuan through various macroprudential tools.
Finally, the institution argues that, given the enormous size of the global foreign exchange market, it is extremely complex to maintain prolonged intervention and achieve a lasting effect, so no central bank can alter the underlying trend of the exchange rate, nor can any country sustainably enhance its trade competitiveness with a continued devaluation of its currency.