Updated: 2005-06-25
China's central bank governor Zhou Xiaochuan said it's too soon to drop the decade-old yuan peg and that he has no plans to discuss the currency's link to the U.S. dollar at a weekend meeting of the world's central bankers in Basel, Switzerland.
"The time is not ripe yet" to scrap the link that pegs the yuan at about 8.3 to the U.S. dollar, Zhou said in an interview in Basel, where the Bank for International Settlements is holding a two-day meeting. "Premier Wen has already said enough on the subject. I don't have anything to add."
The U.S. and Europe have been pressing China to loosen the yuan's link and allow the currency to rise, to help shrink a record $60.6 billion U.S. monthly trade deficit and boost growth among the 12 nations sharing the euro. China has pledged to move toward a more flexible exchange rate policy, without giving a timeframe.
Zhou and Finance Minister Jin Renqing are among Chinese officials who have said global pressure on China to revalue the yuan and speculation that the yuan will appreciate will make it harder for the government to make a change.
Premier Wen Jiabao said May 16 that China "won't bow to foreign pressure" and the valuation of the yuan "is the sovereign right of China."
European Union finance ministers are shying away from publicly pressing their Chinese counterparts to let the yuan appreciate, according to EU officials at a meeting of the finance ministers from the EU and Asia in Tianjin, China.
Unfair Advantage
The yuan may be a topic of discussion when Chinese Finance Minister Jin meets with his Japanese counterpart Sadakazu Tanigaki at a meeting of Asian and European finance ministers in Tianjin, China today. Tanigaki said yesterday that China should make its "own judgment" on how to handle the issue.
U.S. lawmakers and manufacturers complain that the peg gives Chinese exporters an unfair trade advantage, and contributed to the loss of 1.1 million factory jobs in the past three years.
Federal Reserve Chairman Alan Greenspan said earlier this week that a revaluation of the Chinese currency would simply "redirect trade" within Asia and "have limited consequences for overall U.S. imports as well as U.S. exports that compete with Chinese products."
China's trade surplus rose to about 4.5 percent of its economy last year from 1.5 percent in 2001. The U.S. trade deficit with China reached an unprecedented $162 billion in 2004, and the broader current account deficit ballooned to a record 5.6 percent of the U.S. economy.
