CHINA will not engage in competitive currency devaluations, Premier Li Keqiang stressed, hours after China hit back in an escalating tariff war between the world’s largest economies.

Addressing a World Economic Forum event in the port city of Tianjin yesterday, Li did not directly mention the trade conflict but he said talk of China deliberately weakening its currency was “groundless.”

“One-way depreciation of the yuan brings more harm than benefits for China,” he said. “China will never go down the road of relying on yuan depreciation to stimulate exports.”

China will not do that to chase “thin profits” and “a few small bucks.”

Li went on to say that the world’s multi-lateral trading system should be upheld, and that unilateral trade actions will not solve any problems.

The trend of globalization is unstoppable, even though there are flaws in the process, and the basic principle of free trade should be maintained, Li said.

China’s process of opening up will only quicken, Li said.

His remarks gave a lift to the yuan, which has lost about 9 percent of its value since mid-April amid the ongoing trade war.

On Tuesday, China added US$60 billion of U.S. products to its import tariff list after U.S. President Donald Trump announced planned levies on US$200 billion of Chinese goods.

The new U.S. tariffs will begin Sept. 24 at 10 percent and will increase to 25 percent by the end of 2018.

Oxford Economics said in a note that prospects for near-term easing in tensions were low.

“But the likelihood of de-escalation will rise over time as the increasing economic impact in the United States will make the Trump team less combative,” the note said.

Investors were relieved that the latest escalation was less severe than some market participants had expected, with Asian stocks rising yesterday and U.S. Treasury yields near four-month highs.

Maintaining China’s steady growth is increasingly difficult amid significant changes in the external environment, but China will not resort to massive stimulus, Premier Li said yesterday.

China has ample policy tools to cope with difficulties and challenges, and it will keep macro-economic policies steady, Li said.

Reducing taxes and fees will be the focus of China’s more proactive fiscal policy and easing funding difficulties for firms will also be key while keeping monetary policy prudent and liquidity reasonably ample, he said.

The State Council said Tuesday that the government will step up targeted investment in key parts of the economy as well as in areas of weakness with the aim of boosting domestic demand.

It said investment in railway and road projects in central and western China will be increased. It also said it is telling financial institutions to boost support for small exporting firms.

(SD-Agencies)