PBOC chief calls on investors to calm down

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China’s stock market fluctuation on Tuesday was mainly due to investors’ emotional response to market uncertainties, said Yi Gang, governor of the People’s Bank of China (PBOC), China’s central bank, noting investors should keep calm and be rational.

Yi said that the Chinese economy is sound, with stronger resilience of economic growth, more balanced overall supply and demand, and accelerated conversion of growth drivers. And the renminbi (RMB) is one of the few currencies that has appreciated against the US dollar this year.

Based on that, he said he has full confidence about the healthy development of China’s capital market, and called on investors to stay calm and rational as ups and downs are normal in the stock market.

In recent years, the contribution of domestic demand to China’s economic growth has been rising, while the growth dependence on trade has dropped from 64 percent in 2006 to 33 percent, lower than the world’s average level of 42 percent, according to Yi.

He said the current account surplus only takes up 1.3 percent of GDP, down from 10 percent in 2007, and the Chinese economy’s capability to defend against external shocks has been increasing.

With a huge market of 1.3 billion people, which means enormous domestic growth potential, China has the ability to cope with all kinds of trade frictions, Yi said.

He said the PBOC has always attached great importance to the impact of external shocks, and will proactively and comprehensively use various monetary policy tools to maintain stable liquidity, and hold fast to the bottom line that no systemic financial risks should occur.

He reiterated that China will not stop deepening reform and expanding its opening up, which will benefit both China and the world.

After Trump's latest threat to China, Shanghai and Hong Kong shares led a sell-off across Asian markets on Tuesday, with Asian stocks sank to a four-month low.

On Tuesday, the yuan opened onshore trade at 6.4450 per dollar, and weakened to a low of 6.4754 at one point. It ended at 6.4743 by the official close of domestic trading in the late afternoon, the weakest such close since Jan. 11.

(With inputs from Reuters)