Hu Says China Will Press Ahead On Yuan Reform
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President Hu of China said after meeting with President Bush that China will “unswervingly press ahead with reform” of how it manages its currency exchange rate.
Changes will be made cautiously, he added. “We will follow the principle of benefiting not only China but also the world at large” on the renminbi exchange rate mechanism, Mr. Hu said yesterday with Mr. Bush at his side at Beijing’s Great Hall of the People. He did not elaborate on the timing of any steps China may take.
Mr. Hu and Mr. Bush also pledged their governments to continued cooperation on economic issues, the war against terrorism, working to persuade North Korea to give up its pursuit of nuclear weapons, and confronting the threat of avian influenza.
China has Asia’s second-largest economy after Japan and it is the region’s fastest growing. The controls on its currency make Chinese goods cheaper on world markets, and that has raised concerns in America about the trade imbalance between the two countries, which reached a record $162 billion last year and may exceed $200 billion this year, government data show.
China revalued the yuan, a denomination of its currency, the renminbi, by 2.1% to 8.11 against the dollar on July 21 and started managing its value against a basket of currencies including the euro and yen. The yuan is allowed to move by as much as 0.3% against the dollar and 3% against the euro, yen, and other currencies from a daily rate set by the central bank.
In America, Senators Schumer and Graham, a South Carolina Republican, have threatened to introduce legislation that would impose a 27.5% duty on Chinese imports unless China moves faster on currency reform.
They put off taking any action until next year. The Bush administration argues that easing controls on the currency would benefit China.
“Most experts who look at the issue understand that ultimately, for a maturing economy like China’s, they need to have an exchange rate mechanism that’s responsive to market forces,” Mr. Bush’s deputy national security adviser for economic affairs, Faryar Shirzad, told reporters on Saturday. “Right now they control it very tightly.”
