China’s central bank chief has blamed foreign speculators in part for volatility in the yuan and said there is no basis for further depreciation, according to an interview in Caixin magazine.
The Chinese economy grew 6.9% in 2015 – the slowest rate since 1990 – and capital has been flowing out of the country due to worries over flagging growth, causing the currency to weaken.
“International speculative forces have recently focused on shorting China,” People’s Bank of China governor Zhou Xiaochuan said, according to a transcript of the interview posted on the bank’s website on Saturday.
“They are eager to manufacture public opinion to try to force an outcome as soon as possible,” he said, but did not identify them.
Chinese state media has taken aim at investor George Soros for saying at the recent World Economic Forum in Davos that a hard landing for the world’s second largest economy is “practically unavoidable”.
In early January China guided the yuan—also known as the renminbi – down by setting its daily fix lower for eight consecutive sessions, representing a 1.4% fall, before it returned to stability.
The falls raised fears of a creeping devaluation, as it echoed moves in mid-August when China adjusted the yuan down nearly 5% over a week.
Zhou vowed China would use its massive foreign exchange holdings to defend the yuan.
“China has the world’s largest foreign exchange reserves,” he said. “We will not let speculative forces guide market sentiment.”
The country’s foreign exchange reserves dropped $99.5bn to $3.2tn in January, according to official figures, as the central bank sold dollars to slow the slide in the yuan.
But Zhou said: “There is no foundation for continued depreciation (of the currency).”
He pledged that currency reforms would continue despite the turmoil although the government would maintain its management role.
China keeps a tight grip on the yuan on worries free capital flows will bring financial risk and reduce its control.
“Sometimes the market will show flaws, by being controlled by speculative forces or short-term sentiment and a herd effect,” Zhou said.