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China seeks to stabilize its currency

The US has recently labelled China as a currency manipulator when the latter allowed the yuan to fall below the threshold of Rmb 7 to 1 to the dollar on Monday. However, World Bank president David Malpass recently stated that China’s monetary policy statements “have been in the direction of stabilization,” though it faces several challenges in its interactions with the world.

Malpass was also asked for his views on the accommodative stances being adopted by central banks across the world, given the gloomy global economic scenario. For instance, the central banks of New Zealand, India & Thailand have reduced their lending rates. In this regard, he commented “with regard to the interest rate point that you made, one of the challenges is that central banks are still buying a lot of these low-interest rate bonds… Governments are the issuers of most of these bonds, so you have the odd situation where under the regulatory policy, governments are favoured. And under the central bank policy, governments are favored. And so it’s not ideal.”