A weaker renminbi, or yuan won't necessarily lift China's sagging economic growth rates, contrary to market expectations, warned an advisor to the People's Bank of China monetary policy committee.
"Looking at the impact on growth, we used to think it [a depreciating renminbi] could boost exports, but the story has become a lot more complicated," said Huang Yiping on the sidelines of the Boao Forum for Asia on Wednesday.
Because the country imports many of the building blocks of its exports via a global supply chain network, a depreciating renminbi could have mixed consequences for exporters, said Huang, who is also an economics professor at Peking University.
At the same time, any effect on exports could also be delayed as a result of the J-curve effect, he added, referring to a situation where a country's trade balance initially worsens following currency depreciation.
Beyond trade, a falling renminbi also has other negative implications for the mainland.
"The economy is very open so when you weaken the currency, you have a little boost to exports but you have an immediate impact on capital outflows and portfolio positions," Huang said. "I'm not sure if you weaken the currency today, it will deliver a positive impact on growth."
Concerns about fund outflows have been on the rise, with analysts pointing to the mainland's shrinking pile of foreign-exchange reserves amid policymakers' recent efforts to prop up the yuan's value. Reserves totaled $3.20 trillion at the end of February, dropping from $3.23 trillion the previous month. That followed $100 billion per month in average currency outflows during November, December and January.