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To: RealMuLan who wrote (26530)	3/29/2005 3:32:54 PM
From: RealMuLan	Respond to of 116555

China won't rush with forex reform REUTERS[ TUESDAY, MARCH 29, 2005 11:34:43 PM] Sign into earnIndiatimes points BEIJING: China will reform its exchange rate regime gradually on a schedule of its choosing and does not plan simply to revalue the yuan, the central bank governor was quoted on Tuesday as saying. The remarks were the latest signal from Beijing that it will not rush to overhaul its fixed-currency system, which the US and others complain makes Chinese exports unfairly cheap. Separately, a top government think-tank forecast economic growth would slow down in the first quarter, despite recent data suggesting no let-up in expansion. Zhou Xiaochuan, governor of the People’s Bank of China, said reforms to the yuan, also called the renminbi, would be unveiled at an “appropriate time.” “We will carry out reforms of the renminbi exchange rate formation mechanism in an active, steady, planned and step-by-step manner,” Mr Zhou was quoted as saying in an interview on the website of the People’s Daily, the official mouthpiece of the ruling Communist Party. Mr Zhou also said China had to consider the regional and global effects of the planned reforms, which would not be aimed merely at adjusting the exchange rate, currently set in a tight range near 8.28 to the dollar. “In looking at our current international balance of payments, the task for the future is mainly to perfect the renminbi’s exchange rate formation mechanism, not merely to adjust the exchange rate,” Mr Zhou said. That is in line with the views of most economists, who see China gradually widening the yuan’s trading band and possibly dropping the dollar peg in favour of a currency basket. Ben Simpfendorfer, an economist with JP Morgan in Hong Kong, said Mr Zhou’s remarks signalled that Beijing would not reform the currency regime due to pressure from trading partners. “The foreign community will be a little disappointed because they are saying there will not be an adjustment to rectify imbalances,” Mr Simpfendorfer said. “Whatever decision is taken needs to be seen in context of exchange rate liberalisation, and that’s how it will be sold,” said Mr Simpfendorfer, who expects China to widen the band slightly before the end of June. Mr Zhou also said the central bank would keep a close eye on the overall economy, consumer price inflation and other indicators to determine whether to raise interest rates. China increased lending rates last October for the first time in nine years. The one-year rate rose 0.27% to 5.58%. A separate report on Tuesday cited a top government research body as forecasting that economic growth will probably slow to 8.8% in the year through the first quarter from 9.5% in the year through the fourth quarter. The State Information Centre also said consumer prices in the first quarter would probably be 2.7% higher than a year earlier. Inflation, which hit a seven-year high of 5.3% in August, was a key factor behind the last rate increase. “There has been support building among economists and academics for an interest rate increase, but I think there’s official reluctance,” Mr Simpfendorfer said. Although adjusting interest rates is a common way to guide the economy in developed nations, China is thought to be reluctant to do so because the higher borrowing costs will put many struggling state firms against the wall. “It’s probably a lesser of two evils to see how far can they go without raising rates,” Mr Simpfendorfer said. economictimes.indiatimes.com

To: RealMuLan who wrote (26530)	3/29/2005 3:33:10 PM
From: RealMuLan	Read Replies (1) \| Respond to of 116555

China to end rebates for cheap steel exports Tue March 29, 2005 10:46 AM GMT+02:00 By Lucy Hornby SHANGHAI (Reuters) - China will slash or abolish export tax rebates for some low-end steel products to curb iron ore and power usage in the world's top steel market, in a move analysts say may calm fears of cheap metal flooding the globe. China -- which became a net exporter of steel products in the final months of 2004 -- would remove a 13 percent rebate on steel billets, a government official told Reuters on Tuesday. The rebate on long products -- typically, rods and bars for construction -- would be reduced to 10 percent from 13 percent, said the official at the tax policy office of the State Council, or cabinet. The measures will take effect from April 1, a senior Hong Kong-based shipping executive told Reuters. "This kills two birds with one stone: it curbs excess capacity in China's low-end steel industry and avoids the potential of trade wars due to rising exports of such products," said Cai Haihong, an analyst at Merchants Securities. "With tax rebates cut or abolished, low-end steel producers will have to either reduce exports or hike their prices on the international markets, weakening their competitiveness." The move is expected to discourage exports, though it might not be enough to prevent some manufacturers from trying to profit from global prices that are 20 to 30 percent higher than in China, on average. China's growing surplus in lower quality steel products threatens to spill out and pressure prices worldwide -- a prospect that has undermined the performance of steel stocks from number-two producer Arcelor SA to U.S. Steel Corp.. Beijing had been expected to curb tax rebates on exports of cheap steel after major suppliers from Companhia Vale do Rio Doce to Rio Tinto Ltd./Plc. raised iron ore prices by 71.5 percent from April 1. The country is trying to cool overheated economic growth and had been pressuring smaller, inefficient steel plants to merge, while encouraging its flagship mills to develop production of higher quality steel products. Tax rebates make exports of some semi-finished steel products profitable because they are large relative to the value of the export, the shipping source added. LOW-END SURPLUS China's steel industry is divided among more than 100 relatively small producers, whose expansions helped boost the country's output by 23 percent to 273 million tonnes in 2004. The country's steel imports fell 21 percent last year to 29.3 million tonnes while exports doubled to 14.23 million tonnes, official data showed. China also became a net exporter of steel billets for the first time in 2004, as exports of 6.06 million tonnes exceeded imports of 3.86 million tonnes. Billets are semi-finished products used to make long products for the construction sector. In the past six months, even small steel mills have become exporters, sending products as far afield as Italy and the United States, the shipping official told Reuters. The rebate changes should have little impact on China's three biggest producers -- Baoshan Iron and Steel Co. Ltd., Angang New Steel Co. and Wuhan Iron and Steel Co. Ltd. -- because they focus increasingly on high-end products, analysts said. Average prices of low-end construction steel in China were only about 1 percent higher in late March than a year earlier, reflecting capacity increases and slowing demand from construction. In contrast, prices of high-end hot-rolled steel had jumped 18 percent, and those of even higher-end cold-rolled steel surged 28 percent, analysts said. reuters.co.za