China's PM insists on 'stable' yuan
China's PM insists on 'stable' yuan
Cindy Sui, Agence France-Presse/Tianjin, China
Chinese Prime Minister Wen Jiabao on Sunday insisted China should
maintain a "stable" yuan, arguing the time was not right for yuan
flexibility, countering growing pressure from the United States.
Wen told a gathering of Asian and European finance ministers a
"basically" stable yuan exchange rate was in the interests of
both China and other nations.
"Keeping the yuan exchange rate basically stable at a
reasonable and balanced level is in the interest of economic
development not only in China but also in neighboring countries
and in the region as a whole and contributes to world financial
stability and expansion of trade," Wen said.
He was speaking at the annual Asia-Europe Meeting (ASEM) of
finance ministers in the northern Chinese city of Tianjin.
The yuan has been pegged around 8.28 to the U.S. dollar for a
decade, giving rise to growing chorus of complaints from
countries believing the Chinese currency is now too cheap and
gives the nation's exporters an unfair advantage.
Fending off pressure, the Chinese premier said every country
was entitled to choose an exchange rate mechanism suitable for
its own conditions.
He said China's exchange rate reform would have to take place
based on an "independent initiative" from Beijing, in a
controlled manner and as a result of a "gradual process," warning
against "undue haste."
"By 'independent initiative,' we mean to independently
determine the modality, content and timing of the reform in
accordance with China's needs for reform and development," Wen
said.
"We must take into consideration both the present needs and
the future development and guard against undue haste."
Wen acknowledged China needed to develop a more market-
oriented and flexible exchange rate system, but cautioned that
since any reform will have far-reaching impact, "it still
requires a great deal of preparation."
China must first take into account the possible impact on the
country's macro-economic stability, economic growth and job
market, as well as the state of its financial system, he said.
Other factors include the level of financial regulations,
resilience of the enterprises and effect on foreign trade as well
as the economic and financial performance of other countries, he
said.
"We must push forward the reform but always stay on top of the
challenges, so as to prevent fluctuations in the financial market
and economic instability," Wen said.
He said China's attitude was "responsible" and will be
beneficial to China's and the global economies.
China has been under heavy pressure from the U.S. and sometime
Europe to ease the peg.
Washington has blamed the yuan's peg on its ballooning trade
deficit with China. Two U.S. senators are sponsoring a bill that
would slap a 27.5 percent tariff on Chinese imports if Beijing
does not take meaningful steps to revalue the yuan.
Japan's finance minister Sadakazu Tanigaki urged China to
adopt yuan flexibility "sooner rather than later" during a
meeting with his Chinese counterpart on the sidelines of ASEM on
Saturday.
European finance policy makers, however, indicated Sunday they
were beginning to support China's view.
"I think it's up to the Chinese authorities to decide at what
base and when they will adopt decisions in that direction," said
Joaquin Almunia, European Commissioner responsible for economic
and financial affairs.
"I think they are perfectly cognizant of what are the demands
of the other main economies of the world, what are the needs of
other economies, but they are in charge of the Chinese economy
and they know perfectly well what to do and when to do it."
Wen on Sunday also called for Asia and Europe to pool efforts
and adopt policies to "maintain the stability of the major
reserve currencies, curb big fluctuations in oil prices and
prevent the rise of trade protectionism in all forms."