A senior central bank official has rejected calls for a quicker
increase in the flexibility of the renminbi exchange rate, saying
the currency's role in rectifying global economic imbalances should
not be exaggerated.
Hu Xiaolian, deputy governor of the People's Bank of China, said
more attention should instead be paid to growing protectionism to
safeguard the health of the world economy, according to a central
bank statement.
She was speaking in Washington on Saturday at a conference
during the semi-annual meetings of the International Monetary Fund
(IMF) and the World Bank. The meetings are a venue for key
financial officials of the two institutions' member countries to
discuss global economic issues.
Officials and economists at the IMF, which has a mandate to
safeguard the global economy and render advice to member countries,
said that Beijing should pursue a more flexible exchange rate, for
the sake of both the Chinese economy and a more balanced global
economy.
However, China did not seem to see the advice as being
appropriate. "The fund... should respect its member countries' core
interests and actual economic fundamentals," Hu was quoted as
saying.
"Biased advice would damage the fund's role in safeguarding
global economic and financial stability."
In July 2005, China abandoned the renminbi's decade-old peg to
the US dollar and let the currency appreciate by 2.1 percent. Since
then, it has gained almost another 5 percent against the
dollar.
However, there has been a persistent international chorus, led
by the United States, arguing that China has not been moving quick
enough in letting its currency rise.
US lawmakers have said that the country's trade deficit was
partly caused by what they believed an undervalued Chinese
currency.
Chinese officials say the yuan's flexibility would gradually
increase but argue that radical steps would generate shocks in the
Chinese economy which could spread to the rest of the world.
"The IMF... should attach significance to stability of domestic
economies (of member countries) when observing their contribution
to outside stability," Hu said.
She said the IMF should strengthen surveillance over the
soundness of economic policies of countries whose currencies are
used as major instruments in other countries' foreign exchange
reserves. She was clearly referring to the US, whose low savings
rate, and fiscal and trade deficits are agreed to be a key cause
for global economic imbalances.
Hu also called attention to what is seen as a rising
protectionist sentiment, which has been causing troubles for
China's exporters.
"We call on all countries to harness the opportunities created
by globalization... and resolutely oppose protectionism," she
said.
(China Daily April 16, 2007)