Premier Wen Jiabao's remarks on a stable renminbi exchange rate has
put an end to the ongoing revaluation debate for the time being.
During his meeting with Citigroup guests on Tuesday, the premier made it
clear that the Chinese Government was mindful of the concerns of the
international community. But, after careful calculations, the administration
reckoned that the current exchange rate complies with the country's reality and
can help promote economic development at home and abroad.
Wen's remarks are so far the highest-profile response to the mounting
pressure world opinion has put on China to revalue its currency.
High-ranking officials like the governor of the People's Bank of China and
the commerce minister have claimed repeatedly in the past two months that it was
not time to change the exchange rate, but an increasingly united world opinion
kept putting revaluation pressure on the country.
Though many of the foreign complaints apparently resulted from either rising
protectionism or misunderstanding of the competitiveness of China's exports,
Chinese authorities are fully aware that renminbi revaluation expectation is
taking shape and has to be properly addressed.
Intense domestic discussions have taken place to weigh the pros and cons of
currency revaluation in line with the country's internal and external
conditions.
The premier's latest comments represent a cautious conclusion to the dilemma,
as well as a firm resolution to continue the government's exchange rate
policies.
It is misleading for foreign critics to cite China's swelling foreign
exchange reserves as a major reason for revaluing renminbi. Accelerated inflow
of foreign capital and growing foreign-funded exporters in China will further
increase such reserves.
Yet, the tangible pressure from the fast growth of foreign exchange reserves
as investment in some sectors of the economy appears overheated does demand
attention from policy-makers.
By announcing that rapid credit growth in the first half of this year was
sound as a whole, the second-quarter monetary-policy report released by the
People's Bank of China on Tuesday revealed that authorities have made up their
minds to seek solutions other than revaluation.
Overseas observers should therefore not underestimate the Chinese
authorities' determination and capacity to pursue a stable currency.
In hindsight, it is easy to see what it would have meant to its neighbours
and the world during the 1997 Southeast Asian financial crisis if China had
adopted a less independent and responsible exchange rate
policy.
