China says no to ‘currency war’

China said on Friday it has never used its currency as a tool to gain an advantage in trade and was not seeking a “currency war,” after US President Donald Trump criticized Beijing for harming American companies and consumers with a devaluation of its yuan. 
Throughout his election campaign, Trump threatened to levy punitive tariffs against China in order to bring down the US trade deficit, and any formal declaration of China as a currency manipulator could provide a mechanism for launching that effort.
Trump on Tuesday unleashed a barrage of criticism against Japan and China, saying the two key US trading partners were devaluing their currencies.
Japanese policymakers hit back on Wednesday at Trump’s accusation, stressing that Japan was abiding by a G20 agreement to refrain from competitive currency devaluation.
Chinese Foreign Ministry spokesman Lu Kang, in the government’s first response to Trump’s remarks, said that trade problems between China and the US should be resolved through talks.
While China was widely viewed to have held down the value of the yuan to gain a trade advantage five to 10 years ago, many economists say that in the past year, Beijing has been working to prop up the yuan’s value.
If the US Treasury Department declares Beijing a currency manipulator, it starts a process under which the Trump administration is required by law to demand special negotiations with Beijing to resolve the issue.
That process could end in punitive duties on Chinese goods aimed at eliminating any advantage that currency manipulation would provide. 
Toward monetary tightening
Meanwhile, China raised two short-term borrowing rates for the first time since 2013 in what analysts called a sign that inflation fears were beginning to override the desire to spur growth in the world’s second-largest economy.
The People’s Bank of China (PBoC) raised the interest rate for the seven-day repurchase agreement — a key tool used to adjust monetary policy — to 2.35 percent from the previous 2.25 percent, a statement on its website showed.
The longer 14- and 28-day repo rates were also hiked by 10 basis points.
Benchmark interest rates were unchanged, and analysts said no adjustments in those key rates were on the horizon yet.
But Friday’s moves were interpreted as a sign of more tightening following looser policy and strong fiscal support for growth last year, which had fueled a property boom and helped stabilize China’s economy amid slowing growth rates.

Source: Arab News