China will not engage in competitive currency devaluations, Premier Li Keqiang has stressed, hours after China hit back with a softer punch than the one landed by the US in an escalating tariff war between the world's largest economies.
Addressing a World Economic Forum event in the port city of Tianjin on Wednesday, Li did not directly mention the trade conflict but he said talk of Beijing 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.
His remarks gave a lift to the yuan, which has lost about 9 per cent of its value since mid-April amid the ongoing trade war.
On Tuesday, Beijing added $US60 billion of US products to its import tariff list in retaliation for US President Donald Trump's planned levies on $US200 billion of Chinese goods.
Speaking to reporters on Tuesday Trump said the US may make a deal at some point with China and that his country is always open to talking.
"We're having a tremendous impact on China. We're doing a very good job with China," he said.
The US has so far imposed tariffs on $US50 billion of Chinese products to pressure China to make sweeping changes to its trade, technology transfer and high-tech industrial subsidy policies, with China responding with similar scale tariffs.
The new US tariffs will begin on September 24 at 10 per cent and will increase to 25 per cent by the end of 2018, with Bank of America Merrill Lynch forecasting a 0.5 percentage point decline in Chinese gross domestic product (GDP) growth for 2019 to 6.1 per cent.
Investors were relieved that the latest escalation was less severe than some market participants had expected, with Asian stocks rising on Wednesday and US Treasury yields near four-month highs.
Australian Associated Press