The governor of the Central Bank of the Philippines has dismissed concerns that Asian nations such as his would be forced to devalue their currencies to ensure their export competitiveness with China, after the People’s Bank of China allowed renminbi to fall against the US dollar in August.
Asked during a Central Banking interview if a change in the terms of trade with China following its devaluation would result in competitive currency devaluations in Asia, Benjamin Diokno said: “No, no, no. We’re not going to do that.”
Renminbi fell past 7 yuan per US dollar in August this year after a breakdown in trade negotiations between US and Chinese officials. The US Treasury subsequently branded China a “currency manipulator” for permitting renminbi’s decline.
Other central banks in the Asia-Pacific region, including Bank of Thailand, the Reserve Bank of New Zealand and the Reserve Bank of India, cut their policy rates shortly after the Chinese decision.
“In the short to medium term, China resorting to currency depreciation is essentially spreading the cost of US tariffs on to all of its trading partners, which is likely to trigger a currency war through competitive devaluation,” Hui Feng, Central Banking contributory editor and ARC Future Fellow at Griffith Asia Institute, wrote at the time. “Asian economies are likely to follow China’s steps if past experiences hold. A number of countries in South-east Asia are major beneficiaries of a supply chain restructuring due to the US-China trade war and would not like to lose momentum due to currency moves.”