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China Premier Li pledges stable yuan, no competitive devaluation

[BEIJING] China Premier Li Keqiang pledged a "stable" yuan exchange rate after a volatile week in which offshore interbank borrowing costs in Hong Kong surged to a record as the country's central bank sought to force a narrowing of its discount to the mainland rate.

"China has the ability to continue to maintain the yuan exchange rate basically stable at a reasonable and balanced standard," Li said in comments posted on a government website Friday.

"China has no intention of stimulating exports through competitive currency devaluation. There's no basis for a continued depreciation of the yuan exchange rate."

The offshore yuan posted its biggest weekly gain since October after the People's Bank of China repeatedly bought the currency in Hong Kong. The yuan traded in the city rose 1 per cent from Jan 8, swinging from the worst weekly performance since the currency's August devaluation.

China is struggling to restore confidence in its currency as economic growth slows despite repeated rate cuts and Chinese citizens accumulate a record level of foreign-currency holdings. The nation's foreign-exchange regulator was said to have verbally instructed some onshore banks to stop yuan leaving the mainland and reduce offshore liquidity.