A consumer shops at a supermarket in Lianyungang, east China's Jiangsu province, April 11, 2023. (PHOTO / XINHUA)

BEIJING - China's cental bank will move to correct pro-cyclical and one-sided market behaviors when necessary to prevent sharp ups and downs of the Chinese currency renminbi (RMB), or the yuan, an official said Friday.

Liu Guoqiang, deputy governor of the People's Bank of China (PBOC), told a press conference that the central bank has the confidence and capability to ensure a stable foreign exchange market.

Commenting on the yuan's recent fluctuations, Liu said its exchange rate is in general determined by the market, and the currency could both appreciate or depreciate depending on various factors amid an open Chinese economy.

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The yuan's exchange rate against the US dollar recently weakened to below 7, the fourth time since 2019, and there have been apparent improvements over the past days, Liu said.

Three supportive factors for the yuan's stability: a sound economic fundamental, a moderate current account surplus, and sufficient foreign exchange reserves

Liu stressed that although the yuan depreciated, it has not deviated from the fundamentals. He cited three supportive factors for the yuan's stability: a sound economic fundamental, a moderate current account surplus, and sufficient foreign exchange reserves.

There will not be a one-sided market for the yuan and the currency will maintain two-way fluctuations and dynamic equilibrium, he said.  

Separately, China's consumer price index (CPI) will see a U-shaped trajectory this year and will be close to 1 percent at the end of 2023, a central bank official said on Friday.

Liu Guoqiang, deputy governor of the People's Bank of China (PBOC), made this prediction at a press conference in response to the country's softening price growth in recent months.

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In June, China's CPI came in flat compared to last year's period, and lower than the 0.2-percent increase in May, while the producer price index went down 5.4 percent.

The CPI may continue to decline in July due to a time lag in demand recovery and the base effect, but will gradually pick up from August thanks to reasonable and moderate monetary conditions, stable residents' expectations, and a closing supply-demand gap, Liu said.

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"We don't see deflation at present and there will not be a deflationary risk in the second half of this year either," Liu said.

The Chinese economy has recovered steadily, with M2 maintaining a relatively sound growth, which is obviously different from the typical deflation in history, Liu added.