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Tue, Oct 21, 2003 - Page 12 News List

China pushing for compromise with US on devaluation


Chinese President Hu Jintao (胡錦濤), under pressure from the US to revalue his nation's currency, agreed on Sunday that Chinese and American experts would study how Beijing could move toward a floating exchange rate, Bush administration officials said.

The administration has maintained that China's currency is undervalued, giving Chinese exporters an unfair advantage. American manufacturers and members of Congress have blamed a weak Chinese currency for the loss of American jobs and the inability of the economy to create new ones.

The new study group, which will involve visits to Beijing by officials from the US Treasury, was announced after US President George W. Bush and Hu met in Bangkok at the APEC forum.

The creation of the study group appeared to be a compromise, designed to take some of the heat out of the growing political squall in the US over the currency issue.

Earlier in the day, Hu spoke to a group of international business executives and told them that the virtually fixed exchange rate for the yuan, was best for China and best for the world.

Any move to revalue the currency would have destabilizing effects, and China would resist that course of action, just as it had during the Asian financial crisis in 1997, he said.

"We will follow the same approach of responsibility to the renimbi exchange rate issue this time," he said. "Keeping the exchange rate of yuan stable serves China's economic performance and conforms to the requirements of the economic development in the Asia Pacific region and the whole world," he said.

But in his speech, Hu did not rule out changes in exchange rate mechanisms as the Chinese economy matured.

"We will maintain the basic stability of the exchange rate at a reasonable and balanced level, while further improving the rate-forming mechanism amid deeper financial reform," he said.

Hu, who was introduced to the executives by the former US Treasury secretary, Robert Rubin, was warmly greeted by the audience.

Many businessmen argue that the Chinese banks are so weak that floating the currency prematurely could precipitate a financial crisis.

"The idea of China revaluing its currency as a panacea to US trade problems is about as loony as the tariffs on steel last year," said Kenneth Courtis, vice chairman of Goldman Sachs, Asia, after listening to Hu.

Courtis said that 60 percent of China's exports came from joint venture companies.

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