China said world leaders should focus on overcoming economic difficulties together and not play the blame game at this weekend’s G20 summit, just days after Beijing announced greater flexibility for its currency.
The yuan was expected to come up in discussions at the G20 meeting in Toronto, which Chinese President Hu Jintao (胡錦濤) will attend.
“Under the current circumstances, all parties should display the spirit of tiding over difficulties together ... instead of playing the blame game, instead of imposing pressure,” Chinese Ministry of Foreign Affairs spokesman Qin Gang (秦剛) said.
He said any further changes to the exchange rate mechanism would be an independent decision by Chinese officials, though they planned to make further reforms.
Meanwhile, the People’s Bank of China said yesterday it would expand a trial program on yuan-denominated cross-border trade to encompass 20 cities and provinces and cover trade with any country.
The trial is designed to increase use of the currency in international transactions and possibly make it fully convertible one day. It has been restricted to 365 firms in Shanghai and four cities in Guangdong Province, which were allowed to use the yuan to settle transactions with Hong Kong, Macau and ASEAN countries.
The central bank said the program would expand to Beijing, Tianjin and other cities as well as Sichuan and Zhejiang provinces. It was not clear from the statement when the expansion would start or how many companies would be involved.
China also took the first step toward honoring a vow to let its currency float more freely, as the central bank set the central parity rate — the center point of the currency’s official trading band — at 6.7980 to the US dollar, 0.43 percent stronger than Monday’s rate of 6.8275.
The move was widely seen as a bid to head off rancor at the G20 summit.
In early trading yesterday, the yuan strengthened to 6.7968 on China’s main foreign exchange market before weakening to 6.8200 on domestic demand for the dollar, Dow Jones Newswires said.
Traders said several Chinese banks were buying the greenback, amid speculation the central bank could be encouraging dollar purchases to reinforce the perception that a more flexible system cuts both ways.
“We saw buying from Chinese banks, mainly mid-sized ones,” a Shanghai-based forex trader said.
The 6.7968 level was the yuan’s strongest since policymakers unpegged the currency from the dollar in mid-2005 and moved to a managed floating exchange rate. However, it was still within Beijing’s tight trading band and analysts said China’s pledge did not presage a major revaluation.
The new trading band signaled that the government was making good on its promise for greater flexibility, said Mitul Kotecha, head of global forex strategy at Credit Agricole in Hong Kong.
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