(Yicai Global) Dec. 2 -- The People's Bank of China will continue to ply a prudent monetary policy to hold the yuan's value stable, rather than competitively devaluing it, Yi Gang, the central bank's governor, said in an article published yesterday on the 71st anniversary of the PBOC's founding.
The country must be ready for a "middle and long-distance run" and hew to a normal monetary policy for as long as possible, Yi wrote in the article which appeared in the Communist Party's authoritative doctrinal journal Qiushi.
"Market supply and demand decide the yuan exchange rate, and we will not use [it] as an instrument to engage in competitive devaluation," Yi said.
All eyes are on the PBOC as China's economy lost more steam in the third quarter, with growth decelerating to almost a three-decade low of 6 percent. Industrial profits also fell 9.9 percent in October, the steepest decline in eight months, according to data the National Bureau of Statistics published on Nov. 27.
"We should not let the money held by the Chinese people become worthless," he added, according to Reuters. "Maintaining positive interest rates and upward-inclined yield curve is generally conducive to the economic entities, and in line with the Chinese people's saving culture, thus beneficial to the sustainable development of the economy."
Major developed economies had difficulty extricating themselves from zero interest rates and were forced to normalize unconventional monetary policies when they adopted unprecedented easy monetary policies after the last global financial crisis, he added.
Keeping a positive interest rate and a normal, upswept yield curve is conducive to providing economic entities with positive incentives, moderate savings and sustainable economic and social development, Yi noted in the article.
The PBOC has set up a dedicated department to take charge of macro-prudential management and is strengthening administration of systemically important financial institutions and financial holding groups, he added.
Editor: Ben Armour