Avoid ‘competitive devaluation’ to boost exports: China
Falling yen might concern prompt other governments to drive down their currencies.
BEIJING — China’s commerce minister has appealed to other major governments to avoid suppressing the value of their currencies to boost exports, warning that could hurt global growth.
Chen Deming was responding to a question at a news conference about the Japanese yen’s weakness but said his appeal also was directed at the US and Europe.
The yen has fallen by about 20% against the dollar since the middle of last year, prompting concern other governments might respond by driving down their currencies to keep exports competitive.
“I’m worried that ‘competitive devaluation’ will lead to oversupply of money and it will have a negative effect on global economic growth,” Chen said.
The new Japanese prime minister, Shinzo Abe, has called publicly for a weaker yen to help exporters compete. His government has not directly intervened in currency markets but its policies have convinced traders it will create new money, eroding the Japanese currency’s value.
Several developing economies also have criticized the US Federal Reserve’s program of bond-buying, dubbed quantitative easing, for pushing up the value of their currencies relative to the dollar.
Finance officials of the 20 biggest industrialized and developing countries issued a joint pledge Feb. 17 in Moscow to “refrain from competitive devaluation.” They promised to “resist all forms of protectionism and keep our markets open.”
Chen appealed to other governments to stick to their anti-devaluation pledge.
“If there were a huge devaluation of those major currencies, it would deliver a huge shock to developing countries by depressing our exports,” he said.