BIZCHINA / News
Rising yuan not linked to Hu's US trip: c.banker
(Reuters)
Updated: 2006-03-18 16:30
Chinese President Hu Jintao's planned visit to the United States next
month is not determining the quickening appreciation of the yuan, Wu
Xiaoling, a deputy governor of the People's Bank of China, said on
Saturday.
Asked by Reuters on the sidelines of a financial forum whether China
would let the yuan rise faster ahead of Hu's trip, expected in late
April, she said: "As Wen Jiabao has said, there is no link. We will use
market means."
A bank clerk counts Renminbi in a bank in Haian, eastern China's Jiangsu
province, March 15, 2006. China's yuan scored its biggest one-day gain to
the dollar on Wednesday since its July revaluation after Premier Wen
Jiabao ruled out a further one-off revaluation of the local currency
yesterday. [China Daily]
Chinese Premier Wen, on Tuesday ruled out a further one-off revaluation
and said the yuan would fluctuate according to market forces.
Wu said later in a speech to the forum that China needed to keep tweaking
its policies to reduce the external payments imbalances that caused its
foreign currency reserves to balloon to $819 billion at the end of 2005,
second only to Japan's.
"China should continue to make adjustments to its foreign exchange policy
of relaxed inflows combined with strict outflows, which is the source of
excessive increases in foreign exchange reserves," she said.
Wu also said China would continue to promote overseas investment. Chinese
companies spent more than $6 billion abroad in 2005 as Beijing encouraged
firms to "go forth" in search of natural resources and markets.
The authorities would also redouble their efforts to cut off what Wu
called the "irrational" supply of foreign exchange -- a reference to
inflows that circumvent China's capital controls in order to speculate on
property or a rise in the yuan.
The yuan gained 0.24 percent this week -- a weekly record since it was
revalued by 2.1 percent on July 21 and cut free from an 11-year old
dollar peg and allowed to float within tightly managed bands.
It has risen a total of 0.98 percent since then, far from enough to
satisfy critics in Washington.
They say the yuan is so undervalued that it gives Chinese products an
unfair advantage in U.S. markets, costing millions of lost American jobs
and fuelling a record bilateral trade gap.
U.S. Senator Charles Schumer, a New York Democrat, and Sen. Lindsey
Graham, a South Carolina Republican, will head to Beijing next week to
hear firsthand what China is doing about its currency, before making a
final decision on a bill threatening the country with a 27.5 percent
import tariff.
Officials have repeatedly said that China will gradually let the yuan
move more freely but that it must first develop the infrastructure of its
foreign exchange market so banks and firms can hedge the risks that come
with greater volatility.
To that end, Wu said China would roll out more currency derivative
products as well as forward rate agreements. These let two parties manage
their risk exposure by fixing a future interest rate today.
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