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Yuan unlikely to gain much in 2006: Expert
(Reuters)
Updated: 2006-01-06 16:25 China's yuan is unlikely to
appreciate much this year, an influential government economist was reported on
Friday as saying, suggesting little change from the steady but extremely slow
rise seen since July's revaluation.
Another government economist forecast continued rises, but did not say how
fast he thought they would be.
The comments came on the heels of calls by United States Treasury Secretary
John Snow for China to allow a further revaluation of the yuan, saying it would
help world economies adjust from trade and current account imbalances.
Ba Shusong, vice head of the financial research institute at the cabinet's
Development Research Centre, said adjusting the exchange rate would not ease
China's current account imbalances.
"The yuan is unlikely to appreciate significantly in 2006," Ba was quoted as
saying in the official Shanghai Securities News.
"The imbalance of international payments should not be eased solely via the
adjustment of forex rates."
Ba added that other measures, such as boosting domestic consumption and
reforming the country's foreign exchange system, could help ease the imbalances.
Beijing has been trying to dampen speculation of a further appreciation of
the yuan, which the United States says is still seriously undervalued and gives
Chinese goods an unfair advantage in global markets.
China revalued the yuan by 2.1 percent to 8.11 per dollar in July. The yuan
has trended higher since then, but in tiny steps totalling just 0.55 percent.
The central bank has repeatedly said it would keep the yuan stable for now,
but has taken steps to prepare for greater currency flexibility.
Economists reckoned the central bank would allow the yuan to rise only slowly
-- about 4 percent this year -- driven more by politics than market forces.
Li Xiangyang, an economist at top think-tank Chinese Academy of Social
Sciences, said in remarks also published on Friday that the yuan is likely to
rise further because it faced additional upward pressure from its recent upward
revision of the economy.
"Objectively, the revision of gross domestic product and the rapid rise in
foreign exchange reserves have created driving forces for the yuan's
appreciation," Li was quoted as saying by a report on a government Web site
(www.china.com.cn).
"With a combination of internal driving forces and external pressure, I think
the yuan will probably continue appreciating in the future," he was quoted as
saying.
In December China revised up its estimate of 2004 GDP by a sixth, reflecting
better information about the fast-growing services sector.
Li also said China faced a tough international trade environment in the near
term because measures by the United States to reduce its trade deficit would
hurt China's exports.
China's fast-growing foreign exchange reserves hit $769 billion at the end of
September.
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