China tells yuan critics to back off

Updated: 2007-01-29 08:36

DAVOS, Switzerland: China wants the rest of the world to respect its gradual pace of economic reform, a senior Chinese central banker said here, telling critics to "clean your own house first."

Wu Xiaoling, deputy governor of the People's Bank of China, avoided naming names but handed out the advice only a few weeks after top US financial policy makers visited Beijing to press China to act faster on liberalizing the yuan.

"There is a Chinese saying that you should put yourself in others' shoes; you need to respect others," she said at the World Economic Forum in Davos. "We respect other people's policies. The Chinese say, 'clean your own house first.'

"We should be very careful how we proceed, and I compare it to walking on ice," she added.

The US Treasury secretary, Henry Paulson, after meeting the Chinese president, Hu Jintao and the prime minister, Wen Jiabao, last month, said the Chinese reluctance to let the yuan quickly appreciate remained a core bilateral issue.

US lawmakers say the yuan, or renminbi, is unfairly undervalued, undermining the competitiveness of American companies and contributing to a soaring US trade deficit.

But Wu said China had "more work to do, especially in the development of the financial system."

"The renminbi will more and more reflect market forces, but we will not have dramatic change in the short term," Wu said.

Beijing ended a direct peg between the dollar and the yuan in July 2005, and since then it has let the currency rise gradually against a basket of currencies. On Thursday the yuan was at its highest point since the revaluation.

The Chinese economy, which grew at its fastest rate in more than a decade in 2006, has been a major issue at Davos.

China has implemented a series of curbs to keep its economic expansion in check, but the world's fourth-largest economy has still achieved double-digit growth in each of the past four years.

The United States says the yuan needs to rise faster to ease global economic imbalances - Asia runs a large current account surplus, and the United States absorbs roughly 70 percent of excess global savings - and to prevent a sudden and disorderly correction.

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