China premier says market may be suprised by yuan reform plans [WTF? are we wrong about the timing of all this with all the hot money? This statement can have money flowing into China. Mish]
Monday, March 14, 2005 5:31:04 AM
forexstreet.com
(Updates with further details, background and quotes from premier)
BEIJING (AFX) - China's Premier Wen Jiabao said plans for reform of the exchange rate regime were in progress and the markets could be surprised by the timing and contents of the measures
Speaking in response to a question at a nationally televised news conference, he said planning to adjust the regime was under way but "regarding the timing of the reform or specific measures to be adopted... maybe they will come unexpectedly." He did not say specifically what Beijing had in mind or when a plan might emerge
"Our objective for exchange reform is to have a market-based, managed, floating exchange rate," he said
"When we consider reform plans, our purpose is to make the exchange rate more responsive to supply and demand in the market." Wen said a number of conditions would have to be met before the currency regime is reformed, including a healthy financial situation along with the development of macro-economic stability and economic growth
Beijing has been under pressure to revalue the yuan, effectively pegged at about 8.3 to one dollar, or loosen controls on the currency to let it trade in a wider band. So far it has said it is moving ahead with reforms but has resisted giving any timetable for its reform plans
The pressure on Beijing for a revaluation largely stems from China's major trading partners, such as the US and Japan, which insist that the currency is being kept artificially weak to make exports more competitive
China insists this is not the case even though it has not ruled out a revaluation
Some critics -- and even the International Monetary fund - have suggested China should consider linking the yuan to a basket of currencies
Wen also said that China would take into consideration its own interests as well as those of neighboring countries and the global economy as a whole, adding that many advocates of the revaluation of China's currency "haven't given much thought to the problems that could arise later on." He did not elaborate on these themes but he mentioned the health of state enterprises and clearly had exporters in mind. The premier also may have been referring to the impact of any inflows of so-called "hot money" into the country on expectations of a further adjustment in the currency after any revaluation |
