China Working Out Yuan Reform Timetable - Yahoo! News
China Working Out Yuan Reform Timetable - Yahoo! News
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China Working Out Yuan Reform Timetable By Tamora Vidaillet
Sat Apr 23, 8:03 AM ET
China's central bank governor said on Saturday there were no serious political or technical obstacles to reform of the tightly held yuan currency but the timetable for any change was still under review.
Zhou Xiaochuan declined to comment on when China might move on the yuan, also called the renminbi, but said expectations were "too high" that a change in the forex regime could resolve problems like trade friction with the United States.
China's yuan policy has been a bone of contention with the United States, which has repeatedly called for a change in the decade-old "peg" to the dollar to relieve pressure on the U.S. trade deficit with China which hit $162 billion in 2004.
U.S. manufacturers complain China keeps the currency artificially weak at the cost of millions of American jobs.
Work had to be done to strengthen the big commercial banks, to develop China's foreign exchange market and to reduce some "over-control in the foreign exchange side," Zhou told Reuters in an interview on the sidelines of the annual Boao economic conference on the tropical Chinese island of Hainan.
Asked what political obstacles remained before a move on the yuan, Zhou said: "There are, I think, no serious political obstacles. We say that for the exchange rate regime, technically we are ready. But for the reform sequencing, we have our own sequencing considerations.
"Whether some preparations are already fully done is under certain kinds of review," he added. "People still have a different opinion on that."
Zhou also sought to temper global expectations of the impact of a move on the Chinese currency , virtually pegged at about 8.28 yuan to the U.S. dollar.
YUAN UNDERVALUED?
Foreign countries have long argued that the yuan is undervalued and therefore gives Chinese exporters an unfair advantage in global markets. Exports in the first quarter were 35 percent higher than a year earlier.
"They may expect that this change can solve a lot of problems, substantially solve those problems," Zhou said.
"We think it's not very realistic, so it needs international coordinated effort, especially on how the U.S. government can reduce their trade deficit. It's not so much dependent on the (yuan) exchange rate."
Some U.S. lawmakers are threatening to penalize Beijing with punitive tariffs, but Bush administration officials say they cannot support such provocative legislation at this point.
On Thursday, U.S. Federal Reserve chief Alan Greenspan said that growing economic pressure would force China to alter its yuan policy, and the sooner that happened, the better.
Chinese officials have suggested the aim is to make the yuan more responsive to market forces rather than simply push through a one-off appreciation, and stress the need for preconditions such as a healthier financial system and a stable economy.
Zhou continued in that vein on Saturday, outlining a hefty reform program that still had to be carried out to banks and foreign exchange markets.
"Our main consideration is mainly strengthening our financial institutions, especially large domestic commercial banks and the other important financial institutions," he said.
"Second, is to some extent reduce the over-control in the foreign exchange side, especially over some of the capital account transactions that can expand the market supply/demand growth to determine the exchange rate.
"The third one is to further develop our foreign exchange market including market mechanisms and some new products to let the domestic clients use the foreign exchange market to hedge foreign exchange risk and for other purposes."
Later, addressing the forum, he signaled the country was on a clear path of reform, and noted that international pressure was not all bad and would force China to speed up reforms to keep conflicts from accumulating.
Copyright © 2005 Reuters Limited. All rights reserved. Republication or redistribution of Reuters content is expressly prohibited without the prior written consent of Reuters. Reuters shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.
Copyright © 2005 Yahoo! Inc. All rights reserved.
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Back to Story - Help
China Working Out Yuan Reform Timetable By Tamora Vidaillet
Sat Apr 23, 8:03 AM ET
China's central bank governor said on Saturday there were no serious political or technical obstacles to reform of the tightly held yuan currency but the timetable for any change was still under review.
Zhou Xiaochuan declined to comment on when China might move on the yuan, also called the renminbi, but said expectations were "too high" that a change in the forex regime could resolve problems like trade friction with the United States.
China's yuan policy has been a bone of contention with the United States, which has repeatedly called for a change in the decade-old "peg" to the dollar to relieve pressure on the U.S. trade deficit with China which hit $162 billion in 2004.
U.S. manufacturers complain China keeps the currency artificially weak at the cost of millions of American jobs.
Work had to be done to strengthen the big commercial banks, to develop China's foreign exchange market and to reduce some "over-control in the foreign exchange side," Zhou told Reuters in an interview on the sidelines of the annual Boao economic conference on the tropical Chinese island of Hainan.
Asked what political obstacles remained before a move on the yuan, Zhou said: "There are, I think, no serious political obstacles. We say that for the exchange rate regime, technically we are ready. But for the reform sequencing, we have our own sequencing considerations.
"Whether some preparations are already fully done is under certain kinds of review," he added. "People still have a different opinion on that."
Zhou also sought to temper global expectations of the impact of a move on the Chinese currency , virtually pegged at about 8.28 yuan to the U.S. dollar.
YUAN UNDERVALUED?
Foreign countries have long argued that the yuan is undervalued and therefore gives Chinese exporters an unfair advantage in global markets. Exports in the first quarter were 35 percent higher than a year earlier.
"They may expect that this change can solve a lot of problems, substantially solve those problems," Zhou said.
"We think it's not very realistic, so it needs international coordinated effort, especially on how the U.S. government can reduce their trade deficit. It's not so much dependent on the (yuan) exchange rate."
Some U.S. lawmakers are threatening to penalize Beijing with punitive tariffs, but Bush administration officials say they cannot support such provocative legislation at this point.
On Thursday, U.S. Federal Reserve chief Alan Greenspan said that growing economic pressure would force China to alter its yuan policy, and the sooner that happened, the better.
Chinese officials have suggested the aim is to make the yuan more responsive to market forces rather than simply push through a one-off appreciation, and stress the need for preconditions such as a healthier financial system and a stable economy.
Zhou continued in that vein on Saturday, outlining a hefty reform program that still had to be carried out to banks and foreign exchange markets.
"Our main consideration is mainly strengthening our financial institutions, especially large domestic commercial banks and the other important financial institutions," he said.
"Second, is to some extent reduce the over-control in the foreign exchange side, especially over some of the capital account transactions that can expand the market supply/demand growth to determine the exchange rate.
"The third one is to further develop our foreign exchange market including market mechanisms and some new products to let the domestic clients use the foreign exchange market to hedge foreign exchange risk and for other purposes."
Later, addressing the forum, he signaled the country was on a clear path of reform, and noted that international pressure was not all bad and would force China to speed up reforms to keep conflicts from accumulating.
Copyright © 2005 Reuters Limited. All rights reserved. Republication or redistribution of Reuters content is expressly prohibited without the prior written consent of Reuters. Reuters shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.
Copyright © 2005 Yahoo! Inc. All rights reserved.
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