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'World must take note of yuan devaluation'
13
Aug '15
As the yuan's devaluation rocked the financial markets, India's Chief Economic Advisor Arvind Subramanian has said that world economies, including India, will have to take note of Chinese currency devaluation designed to avert slowdown in its economy and exports.

In the third devaluation of the yuan in three days, China set the reference rate for its currency more than one percent lower against the US dollar.

The Chinese central bank put the yuan's central parity rate at 6.4010 yuan for $1.0, the China Foreign Exchange Trade System said, a drop of 1.11 per cent from the previous day's 6.3306. The yuan has dropped almost 4 per cent since August 11.

"There is no doubt that China is responding to its own internal development of slowing down of growth and exports in order to give its economy a boost. All of us policymakers around the world, including India, have to take notice of this action," he told reporters in New Delhi.

Subramanian, however, refused to comment on the impact of yuan devaluation on India and its exports.

The first of three devaluations of the yuan began was on August 11 and came on the heels of weak economic data amid a slowdown in the world's second-largest economy and the recent stock market crash.

The world's largest exporter, China's exports account for 13.7 per cent of the global pie. India's overall exports have contracted for seven straight months until June 2015.

Subramanian said China, on the one hand, has devalued the currency and taken measures aimed at reducing the spread between onshore and offshore rates.

"This action is both an endeavour to make their yuan a more plausible credible candidate for inclusion in the SDR basket," he said.

Special Drawing Rights (SDR) is an international reserve asset created by the International Monetary Fund (IMF) to supplement its member countries' official reserves. (SH)

Fibre2Fashion News Desk – India

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