CNBC Transcript: Interview with China Vice Finance Minister, Zhu Guangyao

Following are excerpts from a CNBC interview with Julia Chatterley and Zhu Guangyao, China Vice Finance Minister.

Q: Of all of the challenges that China faces, what do you think it the single biggest one in 2016?

2016 is very key for China and particularly for the Chinese economy's sustainable development. Because this year is the first year of our 13th 5-year plan and it is very important for us to keep this momentum for reform and … economic growth. So we just had the People's Congress approve the government report which set out GDP development … from 6.5 to 7 percent. This, for China, is not very high but we thought this is a sustainable level and compared with other major economies in the world this is still a high level. We just had the fourth quarter GDP figure: 6.7. That's a little, that's beyond our expectations because that's before people thought we'd be 6.5 or 6.6. Now 6.7. Certainly is … our policy combination of middle- and –long term strategy. And to keep the current economic in a stable way to promote structure reform with current economic stability and growth, we thought that was the right strategy.

Q: The credit rating agencies have said we're going to see more corporate defaults from China this year. Are they wrong or are there going to be more defaults?

Their assessment for … change from stable to negative is absolutely wrong because the IMF just downgraded global economic forecasts 2016 from 3.4 to 3.2 and all advanced economies have been downgraded. However, compared with that, the IMF upgraded China's economic forecast from 6.3 to 6.5… I think the IMF forecast gives us a strong response to ratings agencies.

Q: You ruled out the possibility of further depreciation of the renminbi?

Our government made a very strong commitment. We joined the G-20 commitment to avoid competitive currency devaluation. Certainly we are not using this currency devaluation to have a trade advantage. That position is very clear.

Q: How concerned are you about the prospect of further Fed rate hikes this year?

We have very good communication with the Federal Reserve. We appreciate Janet Yellen, think she has a very professionally way in communicating with markets, also through the G-20 channel, bi-lateral channel, not … detail but in general long-term trend. That's indeed, a real superpower, and Fed policy has a big spillover to the world, we hope that's a positive spillover and largely reduces negative spillover. We found that the Federal Reserve very cautious in their process and takes us into consideration. Of course that's largely based on the U.S. domestic economic situation, particularly two key factors – employment and inflation. Take some international economic consideration.

Q: What do you see as the big risk, the external risks for China here?

So globally, we thought that the economic recovery is very slow and downside pressure continues to increase. Although after G-20 finance minister … meeting some improvements in markets, but you can see the IMF just released new forecasts around 2016 economic outlook. That's a downgrade for global economic outlook from 3.4 to 3.2. There's many reason I think some uncertainty continue increase. … economic development in advanced economies faces a slowdown risk and also geopolitical conflict. And U.K. referendum, refugee issue. So certainly we support a very strong, unified EU.