China won't revalue yuan under pressure
China said it would not bow to political and speculative pressures to adjust
the value of its currency as a Senate hearing in the United States debates
Beijing's fixed exchange rate.
"This is a sovereignty issue. No other country has any say in this," he said. "Under external pressure and external speculation pressure, no country can make an adjustment. External noise will only delay the process."
The currency has been effectively pegged since 1994, and has been fixed at around 8.27 yuan to the US dollar since August 1997.
Senior financial Chinese officials have repeatedly said that Beijing will not cave in to political pressure - led by the US Congress - to revalue the currency, arguing that the US trade deficit is the fault of the low savings rates of American households, not the yuan's valuation.
At the same time, they have bemoaned inflows of speculative capital, known as "hot money", which have been flooding into the country betting on a move and causing significant distortions to monetary policy tools.
Analysts have estimated that these inflows in 2004 alone may have topped US$100 billion. These capital inflows have helped China's foreign exchange reserves balloon to US$659.1 billion at the end of the first quarter of this year from US$403.3 billion at the end of 2003.
Zhu noted that foreign exchange reserves are currently "nearly" at US$700 billion, but didn't provide any more details. A local press report earlier this week cited an unnamed central bank official as saying that foreign exchange reserves stood at US$691 billion at the end of May.
Zhu reiterated that Beijing is committed to currency reform, but said that the current pressure is only slowing the process.
"The direction of our reform is clear and we are determined to carry on with it but we will not bow to outside pressure. External noise will only disturb the process," he said. US Federal Reserve chief Alan Greenspan and Treasury Secretary John Snow will testify Thursday about the impact of China's fixed exchange rate on the US economy to the Senate Finance panel.