INTERVIEW-Yuan appreciation good for China, ASEAN -ADB
Thu Apr 8, 2010 1:03pm IST
By John Ruwitch
NHA TRANG, Vietnam, April 8 (Reuters) - China's virtual currency peg was a good policy during the global downturn, but now appreciation of the yuan was in the interests of Asia, the head of the Asian Development Bank (ADB) said on Thursday.
"As a crisis response the Chinese exchange rate policy has been, I think, good for the Chinese economy as well as for the ASEAN economy," ADB President Haruhiko Kuroda told Reuters.
"But now the crisis is over, economies are recovering ... and I think it's in the interests of the Chinese economy as well as the ASEAN economies to see the Chinese currency become more flexible and appreciate," he said on the sidelines of a meeting of Association of Southeast Asian Nations (ASEAN) finance ministers.
The yuan CNY=CFXS has been effectively pegged to the U.S. dollar since July 2008, drawing criticism from abroad and becoming one of the biggest sources of tension in relations with the United States.
At the meetings in Nha Trang, officials said they have not discussed the yuan. Deputy central bank governors of the Philippine and Indonesian central banks said the yuan was not a big worry for the countries in Southeast Asia.
Kuroda said the dollar peg prevented it from possible depreciation alongside other currencies, which was beneficial to some of Asia's economies.
In recent months, though, Asian currencies have been on the rise, while the yuan has been stable at around 6.83 per dollar.
Kuroda said all Southeast Asian economies were recovering, but volatile, sudden inflows of capital could pose a challenge. Capital flows dried up during the downturn, but were now flowing back into emerging economies.
"This sort of volatility and sudden kind of overwhelming inflow of capital into some ASEAN economies could create problems for their macroeconomic management," he warned.
"I'm in full confidence that the ASEAN countries can manage, but still, capital flows could be one of the risks faced by ASEAN countries. In some sense, this is a side effect of success. A very strong recovery in ASEAN countries attracts more capital from the region, from all over the world."
Separately on Thursday, also at the ASEAN finance ministers' meeting, Naoyuki Shinohara, Deputy Managing Director of the International Monetary Fund, echoed the concern.
"Capital inflow is something that should be welcomed but there are cases that excessive short-term capital flow could disrupt sound economic management," he told reporters.
On the monetary policy front, Kuroda told Reuters he expected some other ASEAN countries to follow Vietnam and Malaysia with monetary tightening in the coming months, but he did not say which.
"I'm relatively confident that monetary and fiscal authorities in ASEAN countries would continue to take appropriate policies to address any emerging risks," he said.
It was also time to begin to unwind fiscal stimulus measures put in place during the economic downturn.
"Now the recession is behind and certainly it's time to consider measures to gradually unwind fiscal stimulus measures and gradually reduce the fiscal deficit as well to make the fiscal position, debt situation, more sustainable," he said.
"I think probably countries like Vietnam should start earlier than other countries, like, for instance, Singapore and Malaysia, which have good fiscal position." (Editing by Jan Dahinten)
Thu Apr 8, 2010 1:03pm IST
By John Ruwitch
NHA TRANG, Vietnam, April 8 (Reuters) - China's virtual currency peg was a good policy during the global downturn, but now appreciation of the yuan was in the interests of Asia, the head of the Asian Development Bank (ADB) said on Thursday.
"As a crisis response the Chinese exchange rate policy has been, I think, good for the Chinese economy as well as for the ASEAN economy," ADB President Haruhiko Kuroda told Reuters.
"But now the crisis is over, economies are recovering ... and I think it's in the interests of the Chinese economy as well as the ASEAN economies to see the Chinese currency become more flexible and appreciate," he said on the sidelines of a meeting of Association of Southeast Asian Nations (ASEAN) finance ministers.
The yuan CNY=CFXS has been effectively pegged to the U.S. dollar since July 2008, drawing criticism from abroad and becoming one of the biggest sources of tension in relations with the United States.
At the meetings in Nha Trang, officials said they have not discussed the yuan. Deputy central bank governors of the Philippine and Indonesian central banks said the yuan was not a big worry for the countries in Southeast Asia.
Kuroda said the dollar peg prevented it from possible depreciation alongside other currencies, which was beneficial to some of Asia's economies.
In recent months, though, Asian currencies have been on the rise, while the yuan has been stable at around 6.83 per dollar.
Kuroda said all Southeast Asian economies were recovering, but volatile, sudden inflows of capital could pose a challenge. Capital flows dried up during the downturn, but were now flowing back into emerging economies.
"This sort of volatility and sudden kind of overwhelming inflow of capital into some ASEAN economies could create problems for their macroeconomic management," he warned.
"I'm in full confidence that the ASEAN countries can manage, but still, capital flows could be one of the risks faced by ASEAN countries. In some sense, this is a side effect of success. A very strong recovery in ASEAN countries attracts more capital from the region, from all over the world."
Separately on Thursday, also at the ASEAN finance ministers' meeting, Naoyuki Shinohara, Deputy Managing Director of the International Monetary Fund, echoed the concern.
"Capital inflow is something that should be welcomed but there are cases that excessive short-term capital flow could disrupt sound economic management," he told reporters.
On the monetary policy front, Kuroda told Reuters he expected some other ASEAN countries to follow Vietnam and Malaysia with monetary tightening in the coming months, but he did not say which.
"I'm relatively confident that monetary and fiscal authorities in ASEAN countries would continue to take appropriate policies to address any emerging risks," he said.
It was also time to begin to unwind fiscal stimulus measures put in place during the economic downturn.
"Now the recession is behind and certainly it's time to consider measures to gradually unwind fiscal stimulus measures and gradually reduce the fiscal deficit as well to make the fiscal position, debt situation, more sustainable," he said.
"I think probably countries like Vietnam should start earlier than other countries, like, for instance, Singapore and Malaysia, which have good fiscal position." (Editing by Jan Dahinten)
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