Speculation was mounting yesterday that China was preparing to alter its exchange rate policy and allow for the Chinese yuan to appreciate, after US Treasury Secretary Timothy Geithner’s visit to Beijing.
Senior policymakers in China have been sending out signals in recent weeks that Beijing may consider widening the trading band set for the yuan in 2008 in the face of the global economic crisis.
Geithner made a hastily arranged trip to Beijing on Thursday for a meeting with Chinese Vice Premier Wang Qishan (王岐山), the Cabinet official in charge of economic and financial issues in the world’s third largest economy.
The two sides issued nearly identical brief statements after the talks, saying they had discussed economic relations and the global financial situation, but neither country specifically mentioned the Chinese currency.
However, an unnamed US official told the Wall Street Journal that the issue had indeed been discussed and qualified the talks as “constructive.”
The official said the US side, while not expecting a specific pledge of action from Beijing given its concerns not to be seen as bowing to US pressure, was encouraged that China would soon take action, the Journal said.
But the official emphasized that no breakthroughs were reached.
Xia Bin (夏斌), an adviser to the cabinet and the central bank, on Thursday signaled a possible policy shift, saying China should return to the pre-crisis managed float system now that the worst of the economic downturn was over.
But he cautioned there would be no major moves.
“If the renminbi were to appreciate drastically within a short period of time, what would be the benefit for the United States or for China?” Xia said.
The yuan has been effectively pegged at about 6.8 to the dollar since mid-2008, after rising by more than 20 percent since 2005 as China’s export-driven economy soared.
“It seems increasingly likely that a shift will take place sometime soon ... with an initial move now expected within the next few weeks or even days,” RBC Capital Markets said in a research note.
Researchers at Citigroup said they expect an appreciation of the yuan in the second quarter of the year — calling a widening of the narrow trading band “likely.”
US President Barack Obama, who is due to meet his Chinese counterpart Hu Jintao (胡錦濤) in Washington on Monday, last month called on Beijing to embrace a “market-oriented” exchange rate for the yuan.
In a reminder that any policy shift was likely to be modest, however, the China Daily said in an editorial that a fast rise in the value of the currency was not in the interests of China or the world.
“A rapid appreciation of the Chinese currency will not only cause a loss in the value of China’s foreign exchange reserves but also incur undesirable fluctuations in the global commodities markets,” it said.
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