Date
22 October 2017
Yao Yudong says the Federal Reserve should delay any rate hike to give fragile emerging market economies time to prepare. Photo: Reuters
Yao Yudong says the Federal Reserve should delay any rate hike to give fragile emerging market economies time to prepare. Photo: Reuters

PBoC official blames US for global market turmoil

A senior Chinese central bank official is blaming US equivocation on a planned interest rate hike for the global stock market rout in the past week.

Yao Yudong, head of the Research Institute of Finance and Banking of the People’s Bank of China (PBoC), said the US Federal Reserve should delay any rate hike to give fragile emerging market economies time to prepare.

He said Beijing’s decision to let the yuan fall in value against the dollar should not make it a scapegoat for the sell-off, according to Reuters.

“China’s exchange rate reform had nothing to do with the global stock market volatility, it was mainly due to the upcoming US Federal Reserve monetary policy move,” Yao said.

“We were wronged.”

Many analysts, however, say a key factor roiling markets is worry China’s economy might be slowing sharply despite Beijing’s efforts.

That could have a significant impact on global growth, hitting company earnings and reducing demand for commodities.

Yao said China’s economy remains on a sound footing but some emerging market economies face a possible financial crisis in the years ahead stemming from liquidity stresses if the United States raises rates.

“So we hope the Federal Reserve could further delay its interest rate rise, giving emerging markets ample time to prepare. The Fed should not only consider the US economy, but should also consider the global economy, which is very fragile,” he said.

Fed policymakers acknowledge their actions can stir global markets but argue they need to stay focused on growth at home.

“This isn’t about us. This is about developments abroad and I think what we have to assess is how those developments abroad potentially could impinge on us,” New York Federal Reserve Bank President William Dudley said on Wednesday as he acknowledged the market turmoil had made a US rate hike in September “less compelling.”

China had said the revamp in its foreign exchange regime that opened the gate for the yuan’s sharp decline was an effort to let market forces play a greater role in setting the currency’s value.

Yao shrugged off concerns about a possible hard landing in China, saying growth was still underpinned by more resilient services and consumption.

“China’s economy is in good shape. I’m very confident full-year growth will reach 7 percent,” he said.

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CG/RA

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