Snow presses China to float yuan, plans Beijing emissary
(WASHINGTON) US Treasury Secretary John Snow on Thursday called on China to float the yuan as fast as possible and said he would appoint a high-level emissary to Beijing to press his case.
'China has pegged its currency to the dollar for 10 years. This administration has stressed that China needs to move to float its currency as soon as possible,' Mr Snow told a House of Representatives panel.
The US economic policy chief vowed to make the point again in a meeting yesterday with Chinese People's Bank of China governor Zhou Xiaochuan.
'We are stepping up our diplomatic efforts as well. Soon I expect to announce the appointment of a high-level emissary in Beijing who can start work in early spring,' Mr Snow told the House Financial Services Committee.
A full-scale diplomatic approach was the best path, he said. 'It can also help address exchange-rate inflexibilities throughout the Asian region.'
China agreed that it needed a flexible rate, and the United States was making 'a lot of progress' in its effort, he said.
The country was accelerating efforts to free up the movement of financial capital in and out of the country, and taking 'major actions' to shore up the banking system, Mr Snow said.
Two weeks ago, the People's Bank, China's central bank, said it was committed to keeping the yuan 'basically' stable but also vowed to improve the exchange rate mechanism.
China has come under increasing pressure to revalue its currency, which has been pegged at 8.28 yuan to the dollar.
Although the government has so far withstood calls to float, there is mounting speculation that Beijing will revalue the currency to let it rise by between 2.5 and 10 per cent. US exporters blame the peg for keeping the yuan artificially low and pricing US goods out of the Chinese market.
The Chinese central bank announced plans on Wednesday to raise the interest rate it charges commercial banks for loans of less than one year by 0.63 percentage point.
'The turn towards tighter conditions is a clear recognition that Chinese officials see the economy overheating,' said Merrill Lynch chief North American economist David Rosenberg. - AFP
business-times.asia1.com.sg
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Does anyone here really think we will export more to China on a 2-10% repeg of the RMB? If so what? If they float, what would happen to inflation in the US? What about the price of oil? Are we even convinced at that that the RMB would get stronger vs weaker? Would the law of unintended consequences bite us?
Mish |
