Adding to the confusion over how China's policymakers are handling market volatility, a Chinese official speaking in New York on Monday said it was "ridiculous" to expect the country's currency, the yuan, to depreciate substantially more against the dollar.
"It's ridiculous. It's impossible," Han Jun, deputy director of the office of the Chinese Communist Party's Leading Group on Financial and Economic Affairs, said through an interpreter in response to a question about further yuan depreciation. He spoke at a briefing held at the Chinese consulate in New York.
He was referring to a prediction that the yuan could depreciate much more. The currency has already weakened substantially since the beginning of 2016, but in a note on Monday Goldman Sachs analysts said the currency was headed "meaningfully" lower this year.
The dollar will fetch 7.0 yuan by year-end, Goldman Sachs forecast in the note. In the spot market, the dollar was fetching around 6.5732 yuan Tuesday.
As the mainland economy slows and regulators scramble to contain wild moves in the yuan and stocks, analysts are calling out what appears to be a ham-fisted approach to managing market volatility. That's denting confidence in the ability of China's policymakers to guide the opening up of the country's financial system and the economy's transition away from export manufacturing and toward consumption.
Last week, policy makers at the central bank, the People's Bank of China (PBOC), tinkered with the currency without providing much indication to the market about its endgame - one factor in the China market selloff that spurred a global stock rout.
On Thursday, the PBOC allowed the yuan to fall by the most in five months to the lowest fixing since 2011. But the PBOC is also suspected of intervening several times last week, including on Friday, to slow the renminbi's decline.
On Tuesday, the People's Bank of China (PBOC) set the mid-point of the yuan trading band at 6.5628, barely moved from Monday's 6.5626 fixing, which had suggested a stronger Chinese currency. China's central bank lets the yuan spot rate rise or fall a maximum of 2 per cent against the dollar, relative to the official fixing rate.
Han also told the New York audience that "the economic fundamentals for the RMB exchange did not see a big fluctuation," dismissing concerns that there was a massive capital outflow from China. "China still maintains a huge capital inflow." RMB refers to the renminbi, another word for the yuan.
"I think the attempt to sell short the Chinese RMB will not succeed," he added. "People should have confidence in the RMB."
Data on the mainland's foreign reserves, released last week, showed the biggest annual drop on record in 2015, suggesting that the central bank has sold dollars to support the yuan.
Han said Beijing's foreign exchange reserves had been reduced recently by some $500 billion, though he noted that China still maintained a comfortable $3.3 trillion in reserves.
Meanwhile, in China on Monday, Ma Jun, the chief economist at the PBOC's research bureau, said that China was more focused on the yuan's value against a basket of currency, not the dollar.
"That will be the keynote of the yuan's exchange rate formation mechanism in the foreseeable future," he said, according to a report by state media agency Xinhua.
Correction: Reuters updated the story to reflect that Han is the deputy director of the office of the Chinese Communist Party's Leading Group on Financial and Economic Affairs.