Asia isn’t facing a currency war triggered by China, the President of the Asian Development Bank (ADB) said yesterday. Takehiko Nakao said the recent decline in the yuan reflected the market and was not due to “artificial intervention”.
“They don’t intervene, that’s why there’s more depreciation,” he told foreign correspondents in Manila.
Nakao also ruled out a significant slowdown in China, saying the world’s second largest economy’s strong fiscal position and subdued inflation give it room to stimulate growth.
A sustained depreciation in the yuan puts pressure on other Asian countries to weaken their currencies to stay competitive with China’s export machine. “If there is very rapid depreciation, it might cause some volatility in the market and other countries might follow the case and already some countries have a depreciation of currencies. But I don’t think this is a currency war,” Nakao said.
Nakao reaffirmed ADB’s 6.9 percent growth forecast for China in 2015, and 6.7 percent this year.
“There is a room for stimulus if growth is coming down because fiscal position is strong and the inflation is subdued,” he said.
Nakao reiterated the ADB would cooperate with Beijing-backed Asian Infrastructure Investment Bank (AIIB), which is seen as a rival to Japan-led ADB and U.S.-led World Bank.
Nakao, a former Japanese Vice Finance Minister for International Affairs, said ADB and AIIB may announce by the middle of this year some projects they will co-finance in areas such as transport, roads, renewable energy and water.
All major U.S. allies - Australia, Britain, Germany, Italy, the Philippines and South Korea - have joined the bank.