The US should not make a political issue out of the yuan, a Chinese central banker said yesterday, as the two countries lurched toward a potentially serious clash over Beijing’s currency regime.
People’s Bank of China Vice Governor Su Ning (蘇寧) was responding to a question about remarks on Thursday made by US President Barack Obama, who called on China to move to a “more market-oriented exchange rate.”
Speaking on the sidelines of China’s annual session of parliament, Su said the US should look to itself to boost exports and not cast blame on other countries.
“We always refuse to politicize the yuan exchange rate, and we never think that one country should ask another country for help in solving its own problems,” he said.
Obama’s rare comment about the currency comes as his administration faces a decision over whether to label China a “currency manipulator” in a semi-annual US Treasury Department report due on April 15.
With Obama facing domestic pressure to take a tough line against China and Beijing clinging to a de facto dollar peg, the US Treasury report could prove a tipping point.
If China flinches, it may soon resume the yuan appreciation halted in mid-2008 to cushion the country from the global credit crunch.
If not, scattered trade spats between the two giants could escalate into a full-fledged dispute, with the US even considering across-the-board tariffs against Chinese products.
Still, there are hints of division within China over the yuan. With inflation creeping up, investors are beginning to wonder just when the government will allow the yuan to rise again.
Data this week showed that China has considerable growth momentum and mounting price pressures, leading many analysts to conclude that the central bank is likely to soon increase reserve requirements for the third time this year.
The central bank has been in overdrive trying to dispel worries over inflation after consumer prices rose more than expected to 2.7 percent in the year to last month from 1.5 percent in the year to January.
“We had expected that February’s CPI would be higher than January,” Su said yesterday. After adjustment for seasonal factors, month-on-month inflation did not show any sign of accelerating, he said.
“We are still observing to see whether the price trend is upward or downward, but we hope prices will move down a little bit,” he said.
He added that inflation was likely to peak in June or July when the base effect caused by the comparison with last year starts to fade.
Central bank Governor Zhou Xiaochuan (周小川) also sounded a soothing note on inflation on Thursday, describing last month’s jump as in line with expectations.
Most economists do no not expect interest rates to increase until the second quarter at the earliest.
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