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US' Snow praises China

China appeared to be more assertive while the US displayed special deference to Beijing during weekend gatherings of global economic leaders.

Chinese central bank chief Zhou Xiaochuan (周小川) said in an interview published on Saturday that policies would not be set only with the US in mind.

"We don't think the RMB [renminbi/yuan] exchange rate should reflect China's trade balance with the US," Zhou was quoted as saying by the Emerging Markets newspaper on the sidelines of annual meetings in Washington of the World Bank and International Monetary Fund (IMF).

He noted that China has trade deficits with its Asian partners in contrast to the massive surplus it enjoys with the US.

Shortly before finance ministers of the Group of Seven nations met on Friday, China launched another reform to its currency regime following a small revaluation of the yuan in July.

"We have given some flexibility to the exchange rate, so we are depending on the market to look at the supply-and-demand relationship," Zhou said.

Now, Beijing will evaluate whether the yuan exchange rate "can bring the current account into tolerable balance" before deciding its next step on the currency, he said.

Jin Renqing (金人慶), the Chinese finance minister, told the IMF meanwhile that China "has pursued prudent fiscal and monetary policies, brought under control some destabilizing and unhealthy factors, and maintained relatively rapid economic and social development."

He added that the Chinese government "aims to achieve comprehensive, harmonious and sustainable development and establish a harmonious socialist society, guided by the scientific development view and relying mainly on its own efforts to reform and innovate."

The US has long complained that the yuan is unfairly undervalued, giving Chinese exports a competitive advantage and triggering imbalances in world commerce.

But US Treasury Secretary John Snow had much praise for China and little in the way of criticism during the gatherings.

Snow described a decision by China in July to free the yuan from its dollar peg, allowing it to appreciate 2.1 percent against the US currency, as "a very important step forward" that nonetheless required further action.

"Now that that important first step has been taken, it is critical that we see continuing movement to greater flexibility," Snow told a meeting of IMF policymakers at their annual meeting.

Turning in the direction of Renqing and Zhou, he added: "I applaud you for those actions and encourage you to move forward with your commitment to allow the yuan to be set by the interaction of demand and supply forces as you said you would."

In previous meetings G7 ministers have called specifically for greater exchange rate flexibility in areas of the world where such flexibility is lacking, language seen as targeting China in particular. Such language did not appear in Friday's statement.
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