China’s yuan devaluation could help in the world’s second largest economy’s efforts to fight growth slowdown, according to a senior BRICS Bank official.
Brazil had announced noted economist Paulo Nogueira Batista Junior as the vice-president of the $100 billion BRICS bank earlier this year.
“Currently China is trying to compensate the drop in export and develop the consumption on the internal market. Because, despite the still-high rates, the growth of the GDP in China has also slowed down. And this devaluation, even though it cannot be called very radical, could help reverse this trend,” Batista told Russian agency Sputnik on Wednesday.
Batista has taken up his position as the Vice President of the New Development Bank (NDB) launched by the BRICS in Shanghai where the new lender has based its headquarters.
Earlier in June at a business forum in Russia, Batista said that the BRICS are “not fully satisfied with the international financial architecture, not fully satisfied with the role that our countries are allowed to have at the IMF and the World Bank”.
“Our countries are very active in IMF….We work together at the IMF… Despite this active involvement in the Washington institutions, our countries have begun to realize that we need to do our own thing,” said Batista.
China’s 2 per cent devaluation of the yuan which the central bank described as a “one-off depreciation” was based on a new way of managing the exchange rate that better reflected market forces.
The People’s Bank of China (PBOC) said that the improving US economy was one of the factors weighed in its decision to devalue the yuan.
“The US economy is recovering and markets are expecting at least one interest rate hike by the FOMC (Federal Open Market Committee of the Federal Reserve) this year,” a PBOC spokesperson said on the bank’s website on Tuesday.
The PBOC also said that strengthening dollar valuation is pushing down against the Euro and Yen.
Following the devaluation of yuan by the Chinese government, the Indian rupee fell over 1 per cent to 64.92 per dollar on Wednesday, a level last seen in September 2013.
The Chinese move will not have a direct impact on the Russian rouble and financial markets, the Russian central bank said on Wednesday.
“The volume of transactions in yuan on the domestic foreign exchange market is extremely insignificant when compared, for example, with the volume of transactions with the U.S. dollar or the euro,” the central bank said.
China’s economy grew an annual 7 per cent in the second quarter, beating analysts’ forecasts.
TBP and Agencies