Renewable Energy

Competitive currency devaluation could prompt global financial chaos - ex-PBOC chief

Credit: REUTERS/DENIS BALIBOUSE

Competitive currency devaluation does not benefit any country and could cause chaos to global financial order, former China central bank governor Zhou Xiaochuan said on Friday.

SHANGHAI, June 14 (Reuters) - Competitive currency devaluation does not benefit any country and could cause chaos to global financial order, former China central bank governor Zhou Xiaochuan said on Friday.

Zhou did not specifically mention the Chinese yuan in his remarks to a financial forum in Shanghai on Friday. But global investors are closely watching the weakening currency as the U.S.-China trade war escalates.

The yuan CNY=CFXS has fallen about 2.7 percent to the dollar since a major flare-up in trade tensions in early May and is nearing the psychologically critical 7 per dollar mark, a level last seen during the global financial crisis a decade ago.

Zhou told financial media Caixin in late May that whole numbers "do not really much matter" to the exchange rate, and 7 is not necessarily the threshold for yuan to the dollar.

While most analysts do not expect a sudden yuan devaluation from China as in 2015, traders believe further weakness is inevitable if both sides impose more tariffs.

China should expand its markets and sell more goods to other countries to offset the impact from decreasing exports to the United States, Zhou told the Shanghai forum.

"If the trade war breaks out, it will easily bring changes to the exchange rate, and it is likely to challenge the consensus reached in the past to prevent competitive devaluation," Zhou said.

(Reporting by Winni Zhou and David Stanway; Editing by Kim Coghill)

((winni.zhou@thomsonreuters.com; +86 21 2083 0100; Reuters Messaging: winni.zhou.thomsonreuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Latest Markets Videos

    Reuters

    Reuters, the news and media division of Thomson Reuters, is the world’s largest international multimedia news provider reaching more than one billion people every day. Reuters provides trusted business, financial, national, and international news to professionals via Thomson Reuters desktops, the world's media organizations, and directly to consumers at Reuters.com and via Reuters TV.

    Learn More