Sun, Sep 21, 2003 - Page 11 News List

China defends yuan, says massive trade surplus is dropping

REUTERS , SHANGHAI

China reiterated its desire to maintain the stability of its currency, the yuan, saying its massive trade surplus was showing signs of falling, the official Xinhua news agency reported yesterday.

Pressure on China to let the yuan appreciate has intensified, with G7 finance ministers meeting this weekend in Dubai expected to discuss currency manipulation, and Washington's mounting pressure on Beijing to address trade imbalances through currency liberalisation.

China has vowed repeatedly to keep the yuan -- pegged at 8.28 per USdollar -- stable.

Its long-standing policy is to ease its grip on the yuan and gradually make the currency convertible for capital transactions, but not until it has strengthened its ailing banks.

"We will continue to keep the renminbi [yuan] basically stable," an overnight Xinhua report quoted an official from the State Administration of Foreign Exchange as saying.

China's trade surplus reached US$103 billion with the US last year, but Beijing argues that its overall surplus is falling sharply as deficits with other Asian nations climb.

"China has never sought to pursue such a large trade surplus," the official was quoted by Xinhua as saying. "In fact, our foreign trade surplus appears to be falling."

China warned the US on Friday not to make it a scapegoat for its economic woes by pressing for a revaluation of the yuan at this weekend's meeting of the world's leading industrial powers.

The China Daily, in a commentary seen as reflecting the views of the government, dismissed repeated US calls for a stronger yuan as futile.

"Making China the scapegoat can perhaps help some US politicians score cheap political points, [but] it has nothing to do with the solution of their real problems," the paper said.

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