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China opposes political interference in yuan policy

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China opposes political interference in yuan policy

Agence France-Presse
First Posted 14:58:00 03/06/2010

Filed Under: Foreign Exchange Markets, World Financial Crisis

BEIJING – China said Saturday it was opposed to political interference in its exchange rate mechanism, amid growing international pressure for policymakers to let the yuan appreciate.

"Sometimes, the exchange rate issue can be politicized. We are opposed to this practice," central bank governor Zhou Xiaochuan told reporters on the second day of the National People's Congress, the annual parliamentary session.

The value of the Chinese currency, which has effectively been pegged to the US dollar since mid-2008, has been a bone of contention between Beijing and its Western trading partners, which say it is kept low to boost exports.

China has said maintaining a stable currency is a "top priority" and is needed for the survival of Chinese companies and jobs growth in the world's third-largest economy, as export markets slowly recover from the crisis.

But as the nation powers out of the global crisis – its economy grew by 10.7 percent in the fourth quarter of 2009 after a massive public spending program – there is a growing clamor for the value of the yuan to appreciate.

Defending the controversial exchange rate policy, Zhou said China faced "many uncertainties" and the timing of a return to "normal" policies was a complex issue.

"Although we have seen signs of recovery the impact of the financial crisis is still very keenly felt," Zhou said.

"Sooner or later we will withdraw economic stimulus policies (but) we need to be cautious in choosing the timing of the exit."

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