China’s pledge for a more flexible yuan will slow the nation’s exports this year, adding to difficulties that include the European debt crisis and rising costs, a Chinese government official said.
“I’m not optimistic about the exports this year,” Yu Jianhua (俞建華), a Chinese Ministry of Commerce director general, told reporters on the sidelines of G20 meetings in Toronto on Saturday.
“It’s essential for exporters to cut cost and keep their share in the world trade market,” Yu said.
China indicated on June 19 that it was scrapping the yuan’s two-year-old peg to the US dollar and reiterated the aim at a media briefing on Saturday.
The yuan gained 0.5 percent this week, the most since December 2008. China’s central bank fixed the reference rate at 6.7896 per US dollar on Friday, 0.3 percent stronger than the day before and 0.15 percent higher than the close in the spot market.
The yuan is allowed to trade 0.5 percent on either side of the daily fixing.
China’s economic growth accelerated to 11.9 percent in the first quarter, the fastest pace in almost three years.
Trade surplus has posted a “dramatic drop” after the financial crisis, Yu said. The trade surplus fell to US$35.4 billion in the first five months of this year, compared with US$78 billion in the same period in 2008, Yu said.
China, the world’s largest exporter, is aiming to raise consumption and reduce reliance on exports. Measures will include a structural tax cut of about 500 billion yuan (US$73.6 billion) this year and more subsidies to low-income families, according to Chinese Ministry of Finance director general Zheng Xiaosong (鄭曉松).
“Our major task is to adjust the economic structure and the exchange rate regime reform is in line with this strategic goal,” said Ma Xin (馬欣), a director at the National Development and Reform Commission, on Saturday.
Ma said the exchange rate reform was, and should be, determined by China’s economic fundamentals, not foreign pressure, while Zhang Tao (張濤), head of the international department at China’s central bank, said China’s decision will also help it control inflation and avoid asset price bubbles.
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