China won't devalue yuan, says PM Li

China will stick to market-oriented reform of the exchange rate formation mechanism and will not pursue competitive devaluation of its currency, Premier Li Keqiang said on Wednesday.

His comments came over accusations that China was manipulating its currency to combat US tariffs, Xinhua news agency reported. He said Beijing will not actively weaken the yuan to boost exports.

"The recent fluctuations in the (yuan) exchange rate have been seen by some as an intentional measure on the part of China. This is simply not true," Li said at the opening plenum of the Annual Meeting of the New Champions 2018, also known as Summer Davos, in Tianjin.

"... One-way devaluation of the yuan will bring China more drawbacks than benefits. China will create conditions for a stable exchange rate," he said.

"China's economic fundamentals are solid, with a sound balance of international payments and sufficient foreign exchange reserves. The yuan exchange rate therefore is fully capable of remaining basically stable at a reasonable and balanced level."

Li also said that it was essential that the basic principles of "multilateralism and free trade" were upheld.

The US has engaged in a protectionist agenda since US President Donald Trump took office in 2016, challenging the global system of free trade which has prevailed for decades.

His accusation that China manipulated the yuan raised concerns that the currency market could become the next front in the economic battle between the two countries.

Washington slapped new tariffs on $200 billion worth of Chinese goods earlier this week. Beijing responded by imposing new duties on $60 billion of American imports.

Meanwhile, China reiterated on Wednesday that the only solution to the ongoing trade war was through dialogue.

"The issue can only be resolved though dialogue on the basis of equality, good faith and mutual respect. That's the only way," Foreign Ministry spokesperson Geng Shuang said.

"On one hand the US is asking for contacts, dialogue and extending invitations, but on the other hand it's fluttering with sanctions, with pressures. So these moves have become a routine," he said.

Both the US and Chinese tariffs would come into effect on September 24.

--IANS

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