Premier Li says no basis for yuan’s continued depreciation

China’s premier Li Keqiang

Chinese Premier Li Keqiang said there was no basis for a continued depreciation of the yuan after the central bank allowed the currency to devalue 2.8 percent this month.
The yuan can remain “basically” stable on a “reasonable and equilibrium level,” said Li, according to a statement posted on the State Council’s website Saturday. Li made the comments at a state council meeting on Friday.
The assurances came after the central bank on Aug. 25 cut interest rates for the fifth time since November and lowered the amount of cash banks must set aside to stem the biggest stock-market rout since 1996. Deflation risks, over-capacity and a debt overhang remain a cloud over the Chinese economy, which is forecast for its slowest expansion since 1990.
China will continue to carry out proactive fiscal policy and prudent monetary policy and will use “more precise” measures to cope with downward pressure on the economy, said Li in the statement. The government will prevent regional and systematic risks, according to the statement.
Policy makers want to stabilize Chinese shares before a Sept. 3 military parade celebrating the 70th anniversary of the World War II victory over Japan, two people familiar with the matter, who asked not to be identified because the intervention wasn’t publicly announced, said Thursday.
The Shanghai Composite Index rallied 4.8 percent to 3,232.35 at Friday’s close, following a more than 5 percent surge in the final hour of trading on Thursday. The gauge is still down 37 percent from its June high.
The yuan in Shanghai climbed as much as 0.33 percent on Friday, its biggest intra-day gain since March 19, before closing 0.26 percent stronger at 6.3885 per dollar. Bloomberg