Chinese Premier Wen Jiabao (溫家寶) pledged to US President Barack Obama that China would increase the flexibility of fluctuations in its currency, the official China Central Television (CCTV) reported.
China will push forward yuan reform in an active, gradual and controllable manner, the TV station cited Wen as telling Obama on Saturday in Bali, Indonesia. China is closely monitoring changes in the yuan’s exchange rate, the report said.
Policymakers in the world’s second-largest economy have pledged to adjust the nation’s growth toward domestic demand and narrow its external surplus to help address lopsided flows of trade and investment that contributed to the global financial crisis of 2008. Unbalanced trade flows have triggered calls from the US and other G20 nations for China to allow its currency to trade more flexibly.
PHOTO: EPA
Chinese President Hu Jintao (胡錦濤) told Obama at a Nov. 12 meeting that a large appreciation would not solve US problems. During a trip that began on Nov. 11 in Hawaii, Obama announced steps to expand trade and military cooperation with Asia-Pacific nations that share US concerns over China’s currency and intellectual property policies and territorial claims.
The yuan is allowed to fluctuate 0.5 percent on either side of the daily fixing rate set by the central bank. China’s yuan has appreciated 4.13 percent against the US dollar this year, according to Bloomberg data, the best performance of 10 Asian currencies tracked by Bloomberg.
Obama’s meeting on Saturday with Wen was on the final leg of his Asia-Pacific journey, which also included a stop in Australia.
The non-deliverable forwards market reflected expectations of a depreciation since the end of September, which is the market’s reaction to the yuan’s exchange rate rather than an artificial move, Wen told Obama, according to the report.
The Chinese currency will climb 4.3 percent to 6.08 per US dollar in Shanghai by the end of next year, according to the median estimate of 18 analysts surveyed by Bloomberg.
Separately, a long-term global recession is certain to happen and China must focus on domestic problems, Chinese Vice Premier Wang Qishan (王岐山) said.
“The one thing that we can be certain of, among all the uncertainties, is that the global economic recession caused by the international financial crisis will be chronic,” Wang was quoted by Xinhua news agency as saying on Saturday.
Wang’s comments were the most bearish forecast ever by a top Chinese decisionmaker about the world economy, and Beijing’s worry about a worsening global environment could translate into an impetus for pro-growth policies at home.
China launched a massive fiscal stimulus package with a price tag of 4 trillion yuan (US$650 billion) in late 2008 to avert a big impact from the global financial turmoil.
According to Xinhua, Wang did not speak this time about any major policy change, but reiterated that banks should be more flexible lending to the agricultural sector and small firms.
“As for our country, which relies highly on external demands, we must see the situation clearly and get our own business done,” Xinhua quoted Wang as saying, referring to exports.
China’s central bank, which sometimes has to report to Wang, who is in charge of China’s financial sector, said last week that it was ready to fine-tune monetary policy if needed.
At a meeting of local government officials and financial executives in Hubei Province, Wang said local financial institutions such as city commercial banks and credit cooperatives should not seek to expand their business beyond their regions.
Wang also urged banks to pay close attention to the international financial situation. Xinhua did not give further details.
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