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To: TobagoJack who wrote (48674)	4/18/2004 11:19:39 PM
From: elmatador	Read Replies (1) \| Respond to of 74559

China shifts rhetoric on renminbi trading system By Richard McGregor in Shanghai Published: April 18 2004 19:40 \| Last Updated: April 18 2004 19:40 .l { visibility: hidden; display: block; } Zhou Xiaochuan, the governor of the People's Bank of China, said on Sunday that building a market-driven trading system for its currency was now a "top priority", marking a significant shift in rhetoric from Beijing following last week's visit by Dick Cheney, the US vice-president. Mr Zhou's comments, broadcast on Chinese national television, are a departure from the government's usual refusal to discuss any timetable for a change in the value of the renminbi, now pegged to the US dollar. China has long said that full convertibility of the currency is a long-term policy goal but it has resisted pressure to say when or how. "The demand for making the renminbi fully convertible is becoming higher and higher as the renminbi becomes an important currency in Asia and even globally," Mr Zhou was quoted as saying by China Central Television, according to Reuters. "Building a more market-driven trading system for the renminbi is now a task of top priority." The central banker's remarks come after Mr Cheney reiterated Washington's demand during his visit for China to accelerate its move towards a more flexible currency. Washington believes the Chinese currency, once unpegged, would be revalued and help spur a re-balancing of the US trade deficit with China, which was $125bn last year. Another group pressing for change in the renminbi are speculators, who have poured hot money into China in the past year in the expectation that a currency revaluation is coming. The speculators, who have managed to get around China's closed capital account, helped boost the country's foreign currency reserves to $439.8bn by the end of March. This represents an increase of $36.5bn since the beginning of the year, despite China running an overall trade deficit in the first quarter of 2004 of $8.4bn. Chinese officials until now have made it clear in private that the peg to the US dollar would not be changed this year. It is not clear whether Mr Zhou's remarks represent a shift to a more urgent policy stance on the currency, or are simply a public acknowledgement by China, to the US in particular, that the peg is unsustainable. The central bank is also under pressure to lift interest rates to head off rising inflation, but Mr Zhou said on Friday on the sidelines of a conference in Shanghai that it was "too early" to say a rate increase was necessary. If the government were to allow the currency to float in a wider band than the present fixed rate of Rmb8.28 to the dollar, it might want to take this decision before any rise in rates. news.ft.com