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Bloomberg Yuan Plan Reflects China Consensus, Not U.S., PBOC Adviser Says

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Yuan Plan Reflects China Consensus, Not U.S., PBOC Adviser Says
April 16, 2010, 3:06 AM EDT

April 16 (Bloomberg) -- China has come to a “consensus” on adjusting its exchange rate gradually and wants to avoid the impression that it is bowing to U.S. pressure by allowing appreciation, central bank adviser Li Daokui said

President Hu Jintao asserted China’s right to act independently in meetings with U.S. President Barack Obama so the policy change “won’t be seen as giving in to external pressure,” Li said in an interview with the state-run Central Television broadcast last night. Hu’s comments “have helped resolve pressure from U.S. Congressmen.”

Hu told Obama in Washington this week that his country would follow its own path and won’t yield to “external pressure” on ending the yuan’s 21-month-old peg at around 6.83 per dollar. Congress has urged Obama to impose sanctions on China’s imports unless the yuan is allowed to strengthen.

China may allow the yuan to appreciate by June 30 and widen the daily limit on its fluctuations, while avoiding a one-time jump in value that might endanger export jobs, a Bloomberg survey of analysts this week showed. The yuan should be allowed to appreciate “slowly and gradually” with a wider trading band and more flexibility “over the medium and long term,” Li said.

“On this, China’s policy making and academic circles are basically in consensus,” said Li. “But now this issue has turned into a political subject, and if China appreciates the yuan right after the U.S. calls, the situation will turn into a political game.”

Yuan forwards weakened for the first time in three days after a summit involving the leaders of Brazil, Russia, India and China ended without any discussion of the latter’s currency policy. Twelve-month non-deliverable forwards weakened 0.2 percent to 6.6241 per dollar as of 12:27 p.m. in Hong Kong, reflecting bets the currency will strengthen 3.1 percent.

‘Soft Whip’

Speculation that the peg could go intensified after U.S. Treasury Secretary Timothy F. Geithner had an unscheduled meeting with Chinese Vice Premier Wang Qishan in Beijing on April 8 and delayed a report which could brand the nation a currency manipulator.

A report yesterday that showed inflation cooled in March damped speculation the yuan will be allowed to strengthen soon, even as economic growth accelerates. The nation’s consumer prices rose 2.4 percent in March from a year earlier, after a 2.7 percent gain in February, the statistics bureau said yesterday.

“The gradual and slow appreciation will be a soft whip that will help push forward China’s economic restructuring,” said Li, one of three academic advisers appointed last month to the People’s Bank of China. He is a professor at Tsinghua University in Beijing with Harvard University Ph.D. in economics.

--Li Yanping. Editors: Paul Panckhurst, Sandy Hendry


April 16, 2010..........dang so much has changed in just 4 days

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