China's Xi says to push yuan reform, FX reserves remain ample

Says there is no basis for continued yuan depreciation

China will push forward market-based reform of its currency regime and make the yuan convertible on the capital account over time, President Xi Jinping told the Wall Street Journal in an interview published on Tuesday.

Top Chinese officials have been trying to reassure jittery global markets about their policy goals after a run of soft economic data and China's surprise devaluation of the yuan rattled investors over the past month.

China is advancing changes to make the yuan convertible on the capital account in a "steady and orderly manner," Xi was quoted as saying ahead of a visit to the United States.

 

"Reform of the renminbi exchange rate formation regime will continue in the direction of market operation," he said. The yuan is also known as the renminbi.

A drop in China's foreign exchange reserves was "moderate and manageable," and the level of reserves remains abundant by international standards, Xi said.

"With improvement to the renminbi exchange rate regime and progress in RMB internationalisation, it is quite normal that China's foreign reserves may increase or decrease, and there is no need to overreact to it," he said.

Xi reiterated that there is no basis for continued yuan depreciation.

China's surprise yuan devaluation last month and a plunge in its stock markets since June have fuelled fears of more shocks to the economy, although Premier Li Keqiang has brushed off concerns it was facing a hard landing. 

Since the devaluation, China has scrambled to keep the yuan > steady, running down its foreign exchange reserves by a record $94 billion in August to $3.56 trillion.

The reserves, still the world's largest, were down by $436 billion, or 11%, from a June 2014 peak of $3.99 trillion.

Xi also said that developing capital markets was a key goal of China's reform, which will not change just because of current market volatility.