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Strategies & Market Trends : China Warehouse- More Than Crockery -- Ignore unavailable to you. Want to Upgrade?

To: RealMuLan who wrote (1831)	12/9/2003 12:23:52 PM
From: RealMuLan	Read Replies (1) \| Respond to of 6370

China-exchange rate not factor in US trade deficit CORRECTED - UPDATE 1- Reuters, 12.08.03, 4:52 PM ET By Gertrude Chavez NEW YORK, Dec 8 (Reuters) - The rate of exchange of the Chinese yuan, currently pegged to the dollar, is not a factor in the U.S. trade deficit with China, a senior Chinese official said on Monday. "The exchange rate cannot help the U.S. trade deficit with China," Ma Kai, who heads China's powerful State Development and Reform Commission, told a press briefing. "You must look at the trade imbalance as a function of many factors," said Ma, who is part of the delegation of visiting Chinese Premier Wen Jiabao. Ma said China's trade surplus is narrowing. At the end of 2002, China's overall trade surplus was $30.4 billion but by the end of October 2003, the surplus had narrowed to $14.9 billion, he said. "We believe in reforming the exchange rate but if we reform our exchange rate without one of the proper financial conditions present, we will disrupt not only (the) Chinese but the (other) Asian economies as well," Ma said. Chinese officials have indicated that before they can reform their currency regime, weaknesses in the banking sector have to be addressed more effectively, particularly the problem of a heavy burden of non-performing loans. Last week, China rejected the possibility of any immediate change in the currency's official valuation and suggested that the peg could remain in place for an unspecified time. China does not define its exchange rate mechanism as a fixed peg, although it does have a managed floating exchange rate, Chinese officials said. China's managed exchange rate was instituted in the mid-1990's. The Chinese renminbi trades at around 8.28 to the dollar. On Friday, U.S. Treasury Secretary John Snow reiterated he would continue to press China for a more flexible exchange rate mechanism. U.S. companies contend China's fixed rate puts their products at a disadvantage in the global market. But Ma said on Monday that "by managing this exchange rate, this is our contribution to Asian stability, (for instance) during the Asian financial crisis (of 1997/98)." U.S. manufacturers complain the peg amounts to an unfair trade subsidy for popular Chinese-made imported goods and that the yuan may be undervalued by as much as 40 percent. China has conceded that it will consider how to make its currency more flexible and eventually float the yuan, but has avoided specifying when that might happen. Copyright 2003, Reuters News Service forbes.com