People's Bank of China (PBoC) Governor Zhou Xiaochuan assured investors ahead of G20 finance ministers' and central bankers' meeting, of the bank's ability to manage current crisis and contain excessive volatility in its currency and stock market.

According to Mr. Zhou, there is no basis for persistent Yuan depreciation and there are enough policy spaces for the central bank to take measures if needed, "China still has some monetary policy space and multiple policy instruments to address possible downside risks".

We at FxWirePro, do believe in China's ability to contain crisis, however Mr. Zhou's comments should be taken with a pinch of salt. Last year March, he said nothing to worry over capital outflow but later under the pressure PBoC had to force devalue Yuan to alleviate pressure.

He also indicated about fiscal policies, which is a much more powerful tool for China that fiscal policy would be more pro-active by reducing taxes and temporarily let the deficit rise. He during his speech pointed out that Yuan has been stable in recent weeks, however we believe PBoC might have played a hand in that.

According to him in the short run, China's economic fundamentals is not being reflected by Yuan exchange rate and since China is running a large current account surplus, growth is still relatively strong and inflation in low Yuan will start reflecting the fundamentals in medium to long term.

Yuan is currently trading at 6.537 per Dollar.

Two day G20 finance ministers' meeting is beginning today in Shanghai.