Yuan not artificially low; value of yuan to stay steady: Forex official
Associated Press, Beijing
A top Chinese economic official on Monday denied that the country keeps its currency artificially low and vowed to keep the value of the yuan steady while foreign exchange controls are gradually relaxed.
China's trading partners, especially the United States, have pushed Beijing to stop setting the value of the yuan at about 8.28 to the U.S. dollar.
They argue that given the dollar's recent weakness, that makes China's exports artificially cheap, lending its exporters an unfair price advantage.
That charge implies that China manipulates its exchange rate for its own benefit, which is "completely a rumor," the official Xinhua News Agency quoted Guo Shuqing, director of the State Administration of Foreign Exchange, as saying.
Echoing comments made to lawmakers by Premier Wen Jiabao, Guo said China plans to keep the yuan's value "basically stable."
Chinese leaders have given no timetable for foreign exchange reforms, contending that the fragile financial system requires a stable currency.
"Sharp appreciation of the yuan is unlikely," Xinhua quoted Guo as saying in remarks made over the weekend.
"It is impossible for us to have a free-floating exchange rate."
"A free-floating exchange rate will bring serious consequences," he said without elaborating.
Guo noted that China has been lifting restrictions on foreign exchange dealings by companies and individuals to facilitate trade and investment, working gradually toward its eventual goal of allowing the yuan to trade more freely.
China will allow the market to have more influence over the yuan's value, Guo said.
He did not explain exactly how that would work, but outlined various reforms under consideration, including allowing companies to use various tactics to hedge against foreign exchange risks.
"It is a complicated job and should be done step-by-step," Guo was quoted as saying.