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

To: RealMuLan who wrote (2774)	3/11/2004 1:56:31 PM
From: RealMuLan	Read Replies (1) \| Respond to of 6370

China claims pressure on currency has lessened By Richard McGregor in Beijing Published: March 11 2004 10:09 \| Last Updated: March 11 2004 10:09 Zhou Xiaochuan, the governor of the People's Bank of China, said on Thursday that Beijing's efforts to relieve upward pressure on its currency through a series of monetary measures to reduce renminbi demand had begun to take effect. The central bank head said tighter controls on lending, open market operations to soak up liquidity and allowing Chinese firms to hold greater amounts of foreign currency had helped reduce pressure on the renminbi. "We have been able to choke the over-supply of the monetary base and the excessive growth of credit," Mr Zhou said. Mr Zhou, who was speaking at a press conference during the annual meeting of the National People's Congress, warned that there was a "time lag" before the impact of monetary policy could be assessed, which meant that the Bank remained vigilant about the need for further measures. China has resisted pressure from Washington to begin loosening the longstanding dollar peg for the renimbi, a policy that it believes has been a cornerstone of its economic success in recent years. Mr Zhou continued to emphasise the benefits of "currency stabilty" on Thursday, saying it was crucial in "promoting economic development." China's longer-term plan is to allow the renminbi to fluctuate within a wider band than its current Rmb8.3 peg to the dollar but it has given no indication to the timing of such a move. Some foreign analysts have ambitiously forecast a revaluation as high as 10 to 15 per cent this year, but government officials have suggested that any initial policy change will be slight. China has witnessed a surge in consumer inflation and wholesale prices recently, mainly caused by rising food and raw materials prices, which may help ease pressure on the currency by reducing the country's export competitiveness. Mr Zhou ruled out an interest rate increase this month to tackle rising prices, as he said inflation was still relatively mild. "We have yet to adjust the interest rate this month - the reason why is, although there has been some increase of the CPI, the extent of the growth is not large enough for the adjustment," he said. China last changed deposit and lending rates more than three years ago, in February 2001, reducing the savings rate to 1.98% for single year renminbi deposits and 5.31% for one-year renminbi loans. news.ft.com