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A weak greenback is negative for PRC economy: official

A vendor prepares vegetables at a market in Beijing yesterday. Chinese Premier Wen Jiabao said yesterday that inflation was now the top concern for the nation's 1.3 billion people, as he pledged to take steps to slow the Asian giant's red-hot economic growth. PHOTO: AFP

The US dollar's depreciation is "negative" for the Chinese economy, China's top currency regulator said yesterday.

China will manage its foreign-exchange reserves "according to set guidelines," Hu Xiaolian (胡曉煉) told reporters in Beijing, where she was attending the annual meeting of the National People's Congress. "To the extent that dollar depreciation is negative for the global economy, the Chinese economy will definitely be affected."

A record trade surplus has flooded the Chinese economy with cash and drove the world's largest foreign currency reserves to US$1.5 trillion by the end of last year.

Chinese Premier Wen Jiabao (溫家寶) on Wednesday warned of an increasing number of global uncertainties this year facing the economy, such as the greenback's decline and the US subprime mortgage crisis.

"It's the frying pan or the fire for China," said Stephen Green, senior economist at Standard Chartered Bank PLC in Shanghai. "If they stop buying US dollars or diversify, this will only do further damage to their existing holdings."

Chinese Commerce Minister Chen Deming (陳德銘) said yesterday that the nation's trade surplus would remain "relatively large" this year.

The surplus is"hard to predict," he said.

In December, Chen said the declining dollar is a bigger concern for the economy than the yuan's gains.

The US dollar's depreciation makes major commodities, such as gold and oil more expensive, and reduces the wealth of countries and companies that hold US dollar assets, Chen said at the time.

China's economy, the world's fourth-largest, may grow 10 percent this year, the IMF predicted, down from 11.4 percent last year.
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