Central bank officials have reaffirmed China's position of
gradually moving towards a freely traded currency, responding to
two US senators who are threatening trade sanctions unless the
yuan's value rises.
Wu Xiaoling, a deputy governor of the ,
said on Saturday that China was doing its best and that it would
trust market forces to gradually let the currency move more
freely.
"There will be no wide fluctuation of foreign exchange rates,
because it may harm the steady development of the country's
economy," Wu said.
"The yuan's flexibility is increasing gradually and we will
allow market supply and demand to play a fundamental role in
forming the exchange rate."
US senators Charles Schumer and Lindsey Graham will head to
Beijing this week to hear first-hand about 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.
The senators will meet Chinese officials in Beijing and Shanghai
before deciding whether to proceed with a vote on their bill by
March 31.
Previously, central bank governor Zhou Xiaochuan had claimed
that China would not bow to pressure from the US to bring forward
its timetable for yuan flexibility, according to a Bloomberg report
on March 11.
The yuan last week had its biggest weekly gain against the
dollar since the government scrapped a decade-old peg in July after
Premier Wen Jiabao promised more flexibility. It has gained almost
1 percent since the revaluation.
China is also under pressure to let the yuan trade more freely
before the US Treasury's semi-annual report on global currency
manipulation and President Hu Jintao's visit to the US next
month.
Wu pointed out that there would be no link between President
Hu's visit and the change of China's policy on the yuan's
value.
"We will trust market means," she said. "I want the public to
pay more attention to the development of Chinese enterprises rather
than the slight rise and fall of the daily exchange rate."
Wu made the comments at a financial forum held in Beijing on
Saturday.
The deputy governor said in a speech that China is in a
continuous effort to reduce the imbalances in external payments and
make adjustments to its foreign exchange policy of relaxed inflows
combined with strict outflows.
She said this was the source of excessive increases in foreign
exchange reserves.
Wu said that China would continue to promote overseas investment
as an effective way to balance its currencies.
Chinese companies spent more than US$6 billion abroad in 2005 as
the government encouraged firms to "go forth" in search of natural
resources and markets.
"China will also introduce more advanced financial products
including forward interest rate agreements and currency derivatives
to hedge the risks that it may encounter in a freer interest and
exchange rate market," Wu said.
Another major job in the central bank's 2006 schedule, according
to Wu, is to continue strengthening its efforts to reduce the
yuan's excessive liquidity in the banking system, caused by an
abundant foreign currency reserve.
On July 21 last year, China reset the yuan's value at 8.11 to
the dollar, a 2.1 percent appreciation from the pegged level where
it had been held since 1995, and linked its value to a basket of
currencies including the euro and yen. Under the system, the yuan
is allowed to rise or fall 0.3 percent against the dollar either
side of a daily rate announced by the central bank.
US lawmakers and manufacturers have accused China of keeping the
yuan's value artificially low to spur exports. China's trade
surplus tripled to a record US$102 billion last year, helping to
drive economic growth of 9.9 percent.
(China Daily March 20, 2006)