CHINA’S banking and insurance regulator said Saturday it did not expect a persistent decline in the yuan and warned speculative short sellers they would suffer “heavy losses” if they bet against the currency.

The yuan has lost more than 2.5 percent against the U.S. dollar since the festering China-U.S. trade dispute intensified earlier this month. It is now less than a tenth of a yuan away from the 7-per-dollar level authorities have in the past indicated as a floor.

“Short-term fluctuation of the yuan exchange rate is normal, but in the long run, China’s economic fundamentals determine that the yuan will not depreciate persistently,” Xiao Yuanqi, the spokesman for the China Banking and Insurance Regulatory Commission (CBIRC), told a finance forum in Beijing.

“Those who speculate and short the yuan will for sure suffer heavy loss.”

Xiao was reading from a script prepared for Guo Shu- qing, CBIRC’s chairman and the Communist Party chief of the People’s Bank of China. Guo was scheduled to give a speech at the same forum but couldn’t make it due to last-minute arrangements.

Sources have said China’s central bank will use foreign exchange intervention and monetary policy tools to stop the yuan weakening past the key 7-per-dollar level in the near term.

A defence of the 7 level could help boost confidence in the currency and soothe investor fears about the yuan.

Xiao also said China must look out for hot money moving in and out of the country, as well as large amounts of capital flowing into the frothy real estate market.

“We must be especially vigilant about money from overseas moving in and out in large quantities, and hot speculative money, and we must resolutely fight bubbles in real estate and financial assets,” he said.

With talks stalled between the United States and China, and U.S. President Donald Trump threatening to slap tariffs of up to 25 percent on all Chinese imports, investors are nervously reassessing risks amid growing fears about their damaging impact on the global economy.

The United States slapped higher tariffs on US$200 billion in Chinese goods earlier in May, prompting China to retaliate.

But Xiao said the impact of additional U.S. tariffs on China’s economy, the world’s second largest, would be “very limited” even if the tariffs were levied “to their extreme level.” (SD-Agencies)