Richard Lesser, President and CEO of Boston Consulting Group: The Chinese RMB devalued sharply not so long ago. Some people think that this might trigger a chain reaction, and some even worry about a currency war. What is your view on this? And also now the IMF has postponed its review of the Special Drawing Rights, how do you see the RMB globalizing in the months and years ahead?
Li Keqiang: I wish to draw your attention to one fact: Since the formation of this government, the real effective exchange rate (REER) of the RMB has appreciated 15%. As many currencies significantly depreciated against the dollar recently, developments on the international markets compelled us to adjust the quotation regime of the RMB central parity. Yet it was a small adjustment. Overall, the REER of the yuan has appreciated by a large margin during the term of this government. The truth is, after the small adjustment, the RMB exchange rate is now basically stable. There is no basis for continued depreciation of the RMB, because the Chinese economy has been operating within the proper range, we have ample foreign exchange reserves, and surplus of trade in goods has been rising. All these show that the RMB exchange rate can stay basically stable at an adaptive and equilibrium level. Yet as the Chinese often say, in some circumstances, one may get caught up in the middle of something unrelated.
We have no intention to boost exports by devaluing the yuan. This is not in keeping with our policy of structural adjustment. Still less do we want to see a global "currency war". As the Chinese economy has become so highly integrated into the global economy, a "currency war" would only bring more harm than good to China. As a matter of fact, after the small adjustment of the exchange rate, I once talked about this with relevant departments and some export-oriented firms in China. They said they hope the RMB exchange rate will remain basically stable at a reasonable and balanced level. Should there be market expectations of continued depreciation of the yuan, these companies could hardly get any long-term export order. How could this be beneficial for China' s exports?
As you know, commodity trade takes up a large part in China's total foreign trade. Between January and August this year, China imported 220 million tons of crude oil, up by 10% over the previous year. Soy bean imports rose by 7%, and iron ore imports were over 600 million tons, more or less the same as last year. However, commodity prices have dropped significantly, with some plunging 40-50%. We have been affected as a result. There were less tariffs and hence the strains on China' s public finance. But commodity prices are not something for us to decide. Total import volume has not declined, yet the value of imports has come down as a result of falling prices. Who should be held accountable for this? It is a topic that can be further discussed and debated. If international commodity prices rebound, we would get more import tariffs. This would mean more public money to spend on improving people's lives. There would be change in the PPI too, which is beneficial for improving corporate profitability and performance. This is an issue that requires joint efforts for a solution.
As for internationalization of the RMB, it should be a market-driven process. It needs to fit China's reality of economic development and will take some time. We will gradually achieve full convertibility of the RMB under capital accounts. One thing is certain: a continually devaluing RMB is not conducive to the RMB internationalization process. This is not our policy orientation. China wishes to join the SDR, not just for making the RMB more internationalized, but also for fulfilling China's due international responsibilities as a big developing country. China is not a source of risks for the global economy; China is a driver of world economic growth.
Thank you.
