Thu, Apr 21, 2005 - Page 1 News List

Bush, Snow urge `non-transparent' China to float yuan

AFP , WASHINGTON

US President George W. Bush called on Tuesday on the "non-transparent" Chinese to throw open their currency regime.

In yet another sign of Washington's displeasure over the fixed exchange rate linking the yuan to the dollar, Bush and US Secretary of the Treasury John Snow both demanded the currency be floated as an urgent priority.

Bush' intervention, in an interview with the CNBC financial news network, came after the US and its G7 partners called at the weekend for greater currency flexibility in major economic zones.

"There have been some indications that they're thinking about an interim step toward floating the currency," Bush said in the interview, which was to be aired later on Tuesday.

"We're constantly urging them, if they're going to take that step, to take it as soon as possible and eventually get to a currency which floats," he said.

Bush added that "officials all up and down our administration ... are constantly talking to China about this issue."

Foreign critics argue that the Chinese currency has ridden piggy-back on a falling dollar to give the country's booming exports an artificial edge on global markets.

Officials in both the US and Europe have repeatedly called on Beijing to act. The US Congress, responding to a clamor for action from industry, is mulling a series of laws to try to force China's hand.

`Non-transparent'

But Bush, asked when China might respond to the international pressure, said: "It's hard for me to predict. It's a non-transparent society ... We don't have that same look into the Chinese government."

An ever-more assertive China shows every sign of biding its time before budging on the yuan-dollar exchange rate of 8.28, which analysts say has made a major contribution to its economic miracle.

Snow, in testimony to the House of Representatives committee on financial services, said reforming China's currency system "is one of the highest priorities for our international economic policy."

"The Chinese are now ready to adopt a more flexible exchange rate, they have sufficiently prepared their financial system to live in a world of greater flexibility, and need to take action now," he said.

IMPLICIT REBUKE

At the latest meeting of G7 finance ministers in Washington last Saturday, the world's most powerful industrialized nations implicitly rebuked the government in Beijing for refusing to float the yuan.

The ministers from Britain, Canada, France, Germany, Italy, Japan and the US said that "more flexibility in exchange rates is desirable for major countries or economic areas."

Such countries should "promote smooth and widespread adjustments in the international financial system, based on market mechanisms," they said in a statement.

IMF chief Rodrigo Rato joined in by saying the yuan-dollar peg was contributing to dangerous global imbalances that include the yawning US current account deficit and poor growth in Europe and Japan.

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