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| Sunday, 25 September 2005 |
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China currency to make more flexible The United States Friday described a just-announced move by China to widen its trading band for the yuan as a "technical step" toward greater Chinese exchange rate flexibility. But the initiative - which excluded the dollar - appeared unlikely to fully satisfy US officials who contend that China should do more to give the yuan increased room to move against other currencies. "Our view is that the Chinese have said they will continue to take steps to create greater (currency) flexibility," US Treasury spokesman Tony Fratto said ahead of a gathering of top economic powers. "This is a technical step in that process. We'll continue to monitor the implementation." The United States and the European Union have long complained that the yuan was undervalued, giving Chinese exports a competitive edge and making imports more expensive and less attractive, and have urged China to allow greater room for the yuan to move against other currencies. Fratto's comments were echoed by European Union economic affairs commissioner Joaquin Almunia. "I think that this decision was required because of technical reasons," he said, adding that he hoped it would be "used by the Chinese authorities to fuel into the system more flexibility." The Chinese announcement came just hours before finance ministers and central bankers from the powerful Group of Seven - Britain, France, Canada, Germany, Italy, Japan and the United States - were to meet here to assess global economic prospects. A German official said the G7 ministers were likely to renew their appeal for greater flexibility in Chinese and other Asian foreign exchange regimes. Prior to the meeting, US Treasury Secretary John Snow was scheduled to hold bilateral talks with Chinese Finance Minister Jin Renqing and central bank governor Zhou Xiaochuan. The Chinese officials were in addition to have lunch with the rest of their G7 counterparts, also attended by ministers from Brazil, Russia, India and South Africa. On the eve of the G7 gathering China's central bank widened the yuan's trading band in its currency basket, a move that did not include the dollar. "Non-dollar denominated currencies will be allowed to fluctuate within a 3.0 percent range either side, compared with the original 1.5 percent," the People's Bank of China said in a statement. The adjustment allows for the yuan to fluctuate against currencies such as the euro and the yen by three percent either side of the midpoint but maintains the yuan-dollar band unchanged at 0.3 percent. |
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