Despite recent tumbling in the global financial market in the wake of the novel coronavirus pandemic, it is still too early to tell if a global financial crisis has arrived, a Chinese central bank official said on Sunday.
Chen Yulu, vice governor of the People’s Bank of China, noted that a global financial crisis, besides causing continued panic market collapse, usually triggers the bankruptcy of key financial institutions and severe damage to the real economy.
Many countries have introduced countermeasures against the market turbulence, and their effects remain to be seen, Chen told a press conference.
The PBOC, for its part, has strengthened policy coordination with international organizations and major central banks while informing central banks of the G20 group and major international financial organizations on the effective response to the COVID-19 outbreak, he said.
China supports international multilateral platforms and institutions such as the G20 and the International Monetary Fund to play a positive role in policy coordination and crisis relief, so as to contain the pandemic and keep the global economy and financial markets stable, said Chen.
While participating in international macro-policy coordination, China will work to keep the home market stable in accordance with existing principles and policy frameworks, which is the best way to contribute to global financial stability, he added.
China’s financial market remains generally stable compared with overseas markets, said Li Chao, vice chairman of the China Securities Regulatory Commission.
The A-share market has shown strong resilience and anti-risk ability with a mild decline, he said, attributing this to measures taken by China over recent years to advance supply-side structural reform in the financial market.
To ease risks on the domestic market, the CSRC has taken a series of measures, including lowering the leverage level, reducing the stock pledges of listed companies and controlling the increments, Li noted.
Chen, meanwhile, said that consumer inflation is likely to ease in the following quarters.
Although the outbreak’s impact on consumer prices will continue for a while, he expects the overall inflation to decline quarter by quarter as production resumes.
Chen said price stability is subject to economic fundamentals, and China’s overall balance of supply and demand and stable macro-economy does not support long-term inflation or deflation.
Regarding the exchange rate of the yuan, Chen said it will maintain two-way fluctuations within a reasonable and balanced range, while the yuan-dollar rate would float around 7.
He expects the yuan exchange rate to remain stable in the long term, citing China’s sound economic fundamentals, appropriate interest margin between local and foreign currencies, and its ample foreign exchange reserves.
Xuan Changneng, deputy director of the State Administration of Foreign Exchange, also pointed out that the recent devaluation of the yuan against the US dollar was notably milder than that of currencies such as Euro and British pound in the same period.
Between March 10 and 19, while the dollar index, which measures the greenback against six major peers, surged 6.8 percent, the yuan only weakened 2 percent. Against a basket of currencies, the yuan even strengthened 2.7 percent, according to Xuan.