March 8, 2010, 1:47 a.m. EST
China central bank chief: Yuan policy to change, but not yet
By V. Phani Kumar, MarketWatch
HONG KONG (MarketWatch) -- Chinese central bank Gov. Zhou Xiaochuan said China will in due course move away from its current currency-exchange policy, indicating Beijing doesn't plan to keep the yuan's de-facto peg to the U.S. dollar indefinitely, according to reports.
The central banker described China's foreign-exchange policy as a special response designed to weather the aftermath of the global financial crisis.
But Chinese officials also suggested that the yuan's appreciation may not begin anytime soon, particularly with China's trade surplus rapidly shrinking, as its imports rise while its exports remain sluggish.
"We don't rule out that during some special periods -- such as the Asian financial crisis and the global financial crisis this time -- we adopted special policies, including a special exchange-rate mechanism," Zhou said at a news briefing Saturday during the annual session of the National People's Congress, according to a Dow Jones Newswires report.
"Sooner or later, we will exit [these] policies," the central banker said.
China has restricted the local currency's movements to a very tight range around the current level of 6.82 yuan to a U.S. dollar since July 2008, apparently to protect the country's exporters and the millions of jobs they provide.
However, international pressure has mounted on China in recent months to allow the yuan appreciate, with economists also saying that a stronger yuan -- also known as a renminbi -- would even alleviate inflationary pressures on the Chinese economy.
China The Acquirer
China's rich forex reserves will make it a lead player in global M&A. Eswar Prasad, Senior Fellow, Brookings Institution and a former head of IMF's China division, says technology, commodities, and industrial goods will be the target industries.
Zhou, meanwhile, didn't indicate any timing for the yuan's appreciation.
"We must be very cautious about the timing of normalizing the policies, and that includes the renminbi rate policy," he said, according to a Bloomberg News report.
One reason for the cautious approach is the rapid fall in China's trade surplus. Also speaking at a press briefing during the NPC, Commerce Minister Chen Deming said Saturday that China's trade surplus in the first two months of this year plunged by more than half from a year-earlier.
The nation's trade surplus in February shrank to $8 billion from $14.2 billion in the year-earlier month, while the surplus in the first two months of 2010 contracted 50.2% from about $44 billion in the same period a year ago, Chen reportedly said.
China central bank chief: Yuan policy to change, but not yet
By V. Phani Kumar, MarketWatch
HONG KONG (MarketWatch) -- Chinese central bank Gov. Zhou Xiaochuan said China will in due course move away from its current currency-exchange policy, indicating Beijing doesn't plan to keep the yuan's de-facto peg to the U.S. dollar indefinitely, according to reports.
The central banker described China's foreign-exchange policy as a special response designed to weather the aftermath of the global financial crisis.
But Chinese officials also suggested that the yuan's appreciation may not begin anytime soon, particularly with China's trade surplus rapidly shrinking, as its imports rise while its exports remain sluggish.
"We don't rule out that during some special periods -- such as the Asian financial crisis and the global financial crisis this time -- we adopted special policies, including a special exchange-rate mechanism," Zhou said at a news briefing Saturday during the annual session of the National People's Congress, according to a Dow Jones Newswires report.
"Sooner or later, we will exit [these] policies," the central banker said.
China has restricted the local currency's movements to a very tight range around the current level of 6.82 yuan to a U.S. dollar since July 2008, apparently to protect the country's exporters and the millions of jobs they provide.
However, international pressure has mounted on China in recent months to allow the yuan appreciate, with economists also saying that a stronger yuan -- also known as a renminbi -- would even alleviate inflationary pressures on the Chinese economy.
China The Acquirer
China's rich forex reserves will make it a lead player in global M&A. Eswar Prasad, Senior Fellow, Brookings Institution and a former head of IMF's China division, says technology, commodities, and industrial goods will be the target industries.
Zhou, meanwhile, didn't indicate any timing for the yuan's appreciation.
"We must be very cautious about the timing of normalizing the policies, and that includes the renminbi rate policy," he said, according to a Bloomberg News report.
One reason for the cautious approach is the rapid fall in China's trade surplus. Also speaking at a press briefing during the NPC, Commerce Minister Chen Deming said Saturday that China's trade surplus in the first two months of this year plunged by more than half from a year-earlier.
The nation's trade surplus in February shrank to $8 billion from $14.2 billion in the year-earlier month, while the surplus in the first two months of 2010 contracted 50.2% from about $44 billion in the same period a year ago, Chen reportedly said.