Fan Gang: Yuan Will Weaken

Early September, Blooomberg: PBOC Adviser Says Yuan Should Weaken as Dollar Set to Strengthen
People’s Bank of China’s adviser Fan Gang said a gradual devaluation of the yuan should be allowed as the U.S. dollar is set to strengthen, and that moves to loosen the nation’s capital borders should continue despite outflows.
China’s economy may not pick up, but has bottomed out with housing and manufacturing improving, Fan said in a Bloomberg Television interview in Shanghai. The government should use "moderate control to allow gradual yuan devaluation," said Fan, who is also director of the National Economic Research Institute.
He repeated it again in Tokyo this week. PBOC Tightens Onshore Yuan Liquidity, Unusual before Holiday
- People’s Bank of China’s adviser Fan Gang said that in early years, a large amount of capital flew into China and caused Yuan’s surges at that time; Yuan’s devaluation in recent years is a correction. Also, as the Yuan tracks against a basket of currencies, when currencies in the basket devalue, the Yuan should move lower as well.

Mr. Fang also commented on recent declines in the growth of private investment. He said that production cuts in the private sector may have contributed to the drops but is not the direct reason. The economic cycle may weight more on private investment. As a result, he emphasized the importance of maintaining a moderate economic growth while the country is spending lots of efforts on reforms.

Mr. Fang is a member of the PBOC’s Monetary Policy Committee, which is a consultative body for the Central Bank.

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