Hu to stand firm on yuan-dollar peg at APEC as China tries to
\nbrake economy<\/p>\n
Robert J. Saiget
\nAgence France-Presse
\nBeijing<\/p>\n
China will loom large over an Asia-Pacific summit in Chile,
\nwith the United States hoping that Beijing will loosen a fixed
\nyuan-dollar link and cool, but not freeze, its red-hot economy.<\/p>\n
President Hu Jintao will likely reiterate to his APEC partners
\nChina's longstanding goal of making its currency fully
\nconvertible when they meet in Santiago this weekend.<\/p>\n
But he is unlikely to set a timetable or detail plans to
\nloosen the peg, citing stability in China's markets as a top
\npriority, diplomats and officials said.<\/p>\n
They said Hu will also trumpet efforts to cool down an
\noverheated economy to an estimated, and highly enviable, 9.25
\npercent growth rate in 2004, while restating the importance of
\nstable domestic and global markets for China to maintain
\nsustainable growth.<\/p>\n
\"China's foreign trade will amount to about US$1.1 trillion
\nthis year, while the trade imbalance is estimated at less than
\n$10 billion, which is insignificant,\" Vice Finance Minister Lou
\nJiwei said last week.<\/p>\n
\"Therefore, China has no need to readjust its forex rate,\" Lou
\nsaid in an apparent effort to set the stage for Hu before the
\nAsia-Pacific Economic Cooperation forum summit.<\/p>\n
The yuan has been pegged in a narrow margin around 8.28 to the
\ndollar for nearly a decade, with many economists expecting China
\ngradually to loosen the peg soon but not to abandon it.<\/p>\n
Critics, especially the United States, maintain the currency
\nis undervalued and gives China an unfair trade advantage.<\/p>\n
China has nimbly sidestepped international calls to reform its
\nforex regime since they began in earnest over a year ago, by
\nrepeatedly proclaiming its intention to do so.<\/p>\n
In bilateral talks at APEC with U.S. President George W. Bush,
\nHu is likely once again to reiterate such intentions. Diplomats
\nsaid he would urge Washington to scrap export restrictions on
\nhigh-tech equipment as a way to address a growing U.S. trade
\ndeficit with Beijing.<\/p>\n
China's trade surplus with the United States ballooned to more
\nthan $120 billion last year and has been growing at a record
\nrate, totaling $15.5 billion in September and $15.4 billion in
\nAugust.<\/p>\n
Chinese officials at the summit are expected to try to allay
\nfears of economic overheating but will likely paint a realistic
\npicture of severe developmental imbalances.<\/p>\n
Since last year, Beijing has battled to rein in unruly
\neconomic growth, especially in the construction, steel and cement
\nsectors. Gross domestic product has run at well over nine percent
\nfor the past three quarters.<\/p>\n
Concerns that tougher measures may be necessary have prompted
\nPremier Wen Jiabao to warn time and again of the dangers of
\noverheating and the need for further tightening.<\/p>\n
The heady investment climate in the world's fastest growing
\ndeveloped economy has led to further problems in China's
\nfinancial system, causing money supply to expand too fast and
\ncompounding Beijing's difficulties in deflating a banking system
\nbloated with cash and eager to lend it.<\/p>\n
Last month China raised interest rates for the first time in
\nnine years, the latest in a series of measures to turn down the
\nheat after economic hyperactivity led to severe bottlenecks in
\nenergy and transportation.<\/p>\n
\"The macro-control measures mainly incorporate economic and
\nlegal means, with administrative means as a supplement,\" Ma Kai,
\nhead of the National Development and Reform Commission and a part
\nof China's APEC delegation, said last week.<\/p>\n
\"It will not hinder the rapid development of the Chinese
\neconomy.\"<\/p>\n
However, he cautioned that severe imbalances in economic
\ngrowth have traditionally appeared in China when food production
\nhas fallen and overinvestment is rampant -- as at present.<\/p>\n
\"Ever since last year, unstable elements in the Chinese
\neconomy have been gradually increasing. If we don't take some
\naction, the consequences will be dreadful to contemplate,\" Ma
\nsaid.<\/p>",
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