China must keep a firm grip on the yuan exchange rate in order to keep speculative capital at bay, a senior official at the country's foreign exchange regulator was quoted as saying by local media.
Deng Xianhong, deputy chief of the State Administration of Foreign Exchange, said China risked becoming a prime target for speculators as developed countries pump cash into the global economy, according to China Forex Magazine.
"If we do not control the property bubble, let a stock bubble inflate and allow the yuan to rise freely, China will face the risk of large-scale cross-border capital flows," he said.
The yuan’s gradual ascent picked up steam last week even as Beijing stepped up monetary tightening and announced new measures to fight capital inflows.
On Monday, however, the People's Bank of China fixed the yuan’s daily mid-point versus the dollar at 6.6303, slightly weaker than Friday's 6.6239.
With the United States launching a new round of quantitative easing, many Chinese officials have expressed concern that much of the money will end up streaming into emerging markets, putting pressure on them to fend off unwanted capital flows.
Deng said the U.S. easing could trigger competitive currency depreciation and undermine global economic growth.
"The quantitative easing policy and a 'currency war' would throw the world economy into a raging storm," he added.
Deng said an upsurge in global liquidity would push commodity prices higher, foisting imported inflation on emerging economies.
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