BEIJING, Oct. 10 (Xinhua) -- China has reaffirmed its stance on its foreign exchange policy amid increased discussions over the yuan's valuation, as solid facts and figures support the view that the country's export strength is rooted in its industrial competitiveness rather than currency valuation.
China has neither the need nor the intention to gain trade advantages through currency devaluation, the People's Bank of China (PBOC) said in a policy statement released on Thursday, stressing that the country has never resorted to competitive devaluation.
The statement came as some countries pointed to currency valuation as a cause of trade imbalances, thereby oversimplifying the dynamics between exchange rates and trade.
The conventional view that currency appreciation weakens export competitiveness largely reflects a short-term and static perspective. Over a longer horizon, competitiveness is shaped by much more than exchange rates, analysts have said.
This is particularly evident in China's case. The international competitiveness of Chinese products has at times continued to strengthen even as the RMB appreciated. From 2020 to 2021, the RMB appreciated by about 9 percent against the U.S. dollar, while China's share of global exports increased by 1.7 percentage points in this period, according to the PBOC.
In 2022, by contrast, the RMB depreciated by more than 8 percent against the dollar, while China's share of global exports fell by 0.7 percentage points, PBOC said.
These figures showed that China's imports and exports are relatively insensitive to exchange-rate movements, while neither its goods trade surplus nor its current-account surplus has a simple linear relationship with the RMB exchange rate, said Guan Tao, chief economist at Huafu Securities Co., Ltd.
Attributing China's export strength primarily to currency depreciation or other purported factors including "overcapacity" reflects a fundamental misunderstanding of the sophistication and competitiveness of the country's industrial sector.
At its core, China's trade growth is underpinned by its vast domestic market, comprehensive industrial and supply chains, well-developed infrastructure, abundant and highly skilled workforce, and steadily improving research and innovation capabilities, the central bank noted.
Dong Ximiao, chief economist at China Merchants Union Consumer Finance, said that historically, the world's major trade surplus countries have generally been those with strong industrial competitiveness.
For deficit economies, their deeper challenges lie in structural factors such as low savings rates, high consumption and insufficient industrial competitiveness, issues that cannot be resolved simply by focusing on the exchange rates of their trading partners.
"Declining trade competitiveness in some countries reflects their own structural difficulties," said Hao Yubiao, director of the National Center for Economic Security Studies at Capital University of Economics and Business. "Pointing the finger at other countries' currency exchange rates amounts to avoiding the need for domestic adjustment and does little to solve the underlying problems."
At a time when currencies in neighboring countries have been depreciating, China has refrained from pursuing beggar-thy-neighbor policies or competitive devaluation. This year, both the onshore and offshore RMB have strengthened past the 6.7 mark against the U.S. dollar.
China had never resorted to competitive currency devaluation to boost exports to offset intensive external shocks in the past, the central bank said.
Over the past two decades, the RMB has experienced multiple cycles of appreciation and depreciation, reflecting increasingly pronounced two-way movements and greater exchange-rate flexibility.
The PBOC said that looking ahead, both appreciation and depreciation factors remain in play and that the future direction of the RMB exchange rates remains uncertain. Such two-way fluctuations are consistent with China's efforts to make the exchange rate more flexible and market-oriented.
As a responsible major economy, China has also been committed to addressing such trade imbalances via international cooperation.
At a meeting of G20 finance ministers and central bank governors last month, PBOC Governor Pan Gongsheng said structural reforms are needed across economies to address global trade imbalances. He called on deficit economies to reduce fiscal deficits and raise domestic savings rates, while surplus economies should appropriately promote growth in consumption and investment.
Countries should formulate medium- and long-term policy plans, make clear commitments and follow through on those commitments, Pan said. ■
