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 Investment
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19 Sep 06 14:41
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China won't be hasty in currency reform: central bank chief
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AFP
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SINGAPORE : China will not rush to liberalise its exchange rate regime and it is not certain that any relaxation will lead to an appreciation of the yuan anyway, the country's central bank chief has said.
"Actually we are not very sure whether liberalisation of the exchange rate would necessarily mean the revaluation of the renminbi (yuan)," People's Bank of China governor Zhou Xiaochuan told the Emerging Markets newspaper.
The yuan, which now trades under a managed float system, faces intense upward pressure due to huge trade and investment inflows driven by a foreign binge on Chinese goods but Zhou suggested these could be offset by financial outflows.
"We still have restrictions on (the) capital account. A lot of Chinese citizens and companies want to invest overseas (but there are) restrictions under the Foreign Exchange Act on remittances overseas," he said in the newspaper, published here by the Euromoney group during the IMF and World Bank meetings.
Finance chiefs from the Group of Seven industrialised nations renewed calls over the weekend for China to press ahead with reform of its currency regime following the end of its dollar peg in July last year.
At that time, Beijing revalued the yuan by 2.1 percent and put it into a currency basked system, allowing it to move 0.3 percent daily either side of the dollar. Although in principle, the yuan can appreciate quite sharply under this system, it has been allowed to rise by only a further 2.0 percent.
New US Treasury Secretary Henry Paulson, who takes the case for reform to Beijing on Tuesday, said China needed "greater currency flexibility and stronger domestic consumption as well as financial sector reform."
However, Zhou has made clear that any reform will be "gradual," with complex changes to the banking and financial system.
"Chinese policy is clear so we are gradually moving towards more flexibility with the (currency) regime," Zhou told a seminar Saturday on the sidelines of the International Monetary Fund and World Bank annual meetings.
Zhou told reporters that if market conditions showed a need for a wider trading band for the yuan then "we may consider a wider band."
Addressing an IMF finance committee, he said China would continue its financial and economic reform to try to control its growth.
"We shall pursue our efforts to accelerate economic restructuring and modify our economy's growth model, and widen economic liberalisation to achieve balanced and sustainable development," he said.
- AFP
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