Hu says IMF must not overstate influence of yuan

China's Vice Central Bank Governor Hu Xiaolian (胡曉煉) said the role of currency exchange rates should not be overestimated as the IMF seeks to strengthen surveillance.

"The fund should be realistic -- and not overestimate -- the role of the exchange rate," Hu said in a statement to an IMF meeting in Washington yesterday.

"External stability can only contribute to overall sustained stability when anchored by domestic stability," Hu said.

The IMF has tried to strengthen safeguards for global financial stability, amid calls from the US for the fund to convince China to quicken reform of its currency exchange-rate regime.

Hu said China aims to reduce its balance of trade with countries such as the US

China's reserves surpassed US$1 trillion as the country's trade surplus swelled to a record US$177.5 billion last year.

The yuan gained 3.4 percent against the US dollar last year, compared with an 11 percent surge in the euro and a 14 percent climb in Britain's pound against the US currency.

One of China's major objectives this year is to reduce the imbalance in trade and "comprehensive measures will be taken to expand imports and neutralize export and investment incentives," Hu said in yesterday's statement.

"Policies will aim at promoting household consumption by raising urban and rural household income, creating a better environment for consumption, and providing more support to education, medical care, employment and social security," he said.

Beijing has resisted calls to allow the yuan to strengthen faster on concerns that higher-priced exports will damage some businesses and create more unemployment.

There is no need to broaden the floating range of the yuan as the currency is "not yet pushed to the end" of its trading band, Tang Xu (唐旭), research head of the People's Bank of China, said on April 1.

The currency is allowed to trade up to 0.3 percent on both sides of a so-called central parity.

China on April 10 announced a cut from today in rebates on exports of 76 steel products including stainless steel and cold- rolled coil. The rebate rate was cut to 5 percent, while tax breaks on another 83 grades of the metal will be abolished.

China's trade surplus with the US fell to US$9.5 billion last month from US$12.3 billion in February and its surplus Europe declined to US$6.4 billion from US$11.8 billion.

The US Commerce Department, reversing more than two decades of practice, decided on March 30 to levy countervailing duties on Chinese coated paper to compensate for alleged Chinese subsidies to exporters. The change of policy opens the way for steel, textile and other US manufacturers to apply for the same protections.

"With trade protectionism pressures growing, measures taken by certain countries -- under the pretext of righting global imbalances -- will hinder the trade liberalization process," Hu said in the statement.