Central Bank reaffirms stable forex policy
( 2003-09-22 18:37) (Dow Jones News)
China's central bank and foreign exchange regulator Monday reaffirmed their support for China's stable foreign exchange policy in the face of mounting pressure ahead of the G7 meeting in Dubai for a loosening of the yuan exchange rate.
China's position on its current foreign exchange regime remains unchanged from the firm support for that policy expressed by People's Bank of China Governor Zhou Xiaochuan earlier this month, a central bank spokeswoman told Dow Jones Newswires Monday.
"Our governor has made (our policy) very clear during his interview with (the central bank's newspaper) the Financial News," the spokeswoman said, without elaborating.
The State Administration of Foreign Exchange also issued a defense of China's yuan policy in a statement posted Monday on its Web site.
"We will continue to keep the renminbi (or yuan) exchange rate basically stable," the statement said, citing a SAFE spokesman.
The official rally in support of China's foreign exchange policy comes as the finance ministers and central bankers from the Group of Seven issued an unusual call Saturday for increased flexibility in currency regimes to underpin a balanced global economic recovery.
The G7 representatives urged "major countries or economic areas" to adopt " more flexibility" in their foreign exchange regimes in order to promote "smooth and widespread adjustments in the international financial system, based on market mechanisms."
Mounting international criticism of China's foreign exchange policy and pressure for a possible upward revaluation of the yuan is unwarranted and unwelcome, the SAFE statement said.
"Foreign exchange mechanisms and foreign exchange policy are a country's internal affairs in which other countries are not entitled to interfere," the statement said, citing a SAFE spokesman.
The yuan is only convertible on the trade account and even then is kept in a tightly managed range against the dollar.
Major trading partners such as the U.S. are increasingly blaming the tight limits on the yuan's value for giving China an unfair international trading advantage.
The SAFE and central bank statements indicate China's increasing resistance to international pressure to reconsider its current foreign exchange policy, which peaked this weekend during the G7 meeting in Dubai.
The statement also rejected suggestions there is a link between the stable yuan policy and rising unemployment levels in developed countries.
China's yuan peg has become increasingly politicized in the U.S. with a bipartisan group of U.S. senators earlier this month introducing legislation that would impose an across-the-board 27.5% tariff on U.S. imports of Chinese products. Sponsors of the bill justify it on the grounds of an estimated 2.6 million U.S. manufacturing jobs lost since March 2001 linked to a competitive advantage the yuan peg gives Chinese manufacturers.
"The unemployment in developed countries has nothing to do with China's foreign exchange (policy)," the statement said.
"Between 1998 and 2002, China lost 8.2 million jobs in secondary industry and we have never blamed other countries for this."
The current huge disparity between wages in China's manufacturing sector and those of developed countries wouldn't be noticeably improved by an upward revaluation in the yuan, the statement said.
Web site: http://www.safe.gov.cn/
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