IN what appeared to be an effort to shore up investor confidence in the yuan, a phalanx of China’s central bank advisers signaled their readiness to defend the currency and said a stabilizing economy will temper future depreciation pressure.

    In November, the yuan hit an almost 8-1/2 year low against U.S. dollar, forcing authorities to tighten outbound investment as they scrambled to staunch capital outflows.

    But recent data showing a stabilizing economy have provided some support to the yuan.

    Fan Gang, a member of the central bank monetary policy committee, told China Securities Journal that the latest economic data showed the Chinese economy was stabilizing.

    Deflation had ended, overcapacity and corporate debt issues were starting to get resolved, Fan was quoted as saying. “If next year’s economic growth would be higher than 2016, it would show that the economy has already bottomed out and would enter a recovery period,” Fan said.

    China posted its strongest retail sales growth of the year in November, while surging steel production lifted factory output though private investment began to slow again, leaving the economy more reliant on state spending amid mounting debt.

    The fears about a rush of capital from the world’s second-biggest economy has been fed by U.S. Republican Donald Trump’s upset Nov. 8 election victory. Trump’s campaign threats to slap high import tariffs on Chinese goods and label China a currency manipulator on the first day in office Jan. 20 have stoked uncertainty about the yuan’s outlook.

    The yuan has already lost more than 6 percent to the dollar so far this year, pressured by a broad rally in the dollar on the back of bets that Trump’s policies will set U.S. growth on a higher gear, and prompt the Federal Reserve to raise rates at a faster pace.

    In the same article, Sheng Songcheng, an adviser to the People’s Bank of China, said he was opposed to a free float of the yuan as that would bring limited incentive to exports and economy while bring negative impacts to imports.

    “Once the public’s confidence in the yuan gets hurt, the economy will be hit hard, and the foreign exchange reserves would also be hardly to get protected,” Sheng was quoted as saying.

    The newspaper also cited former central bank advisor Yu Yongding as saying the central bank should appropriately intervene in the foreign exchange market while strengthening capital controls. (SD-Agencies)