主题：【人民币走向】郭树清：先搞银行改革，再图汇率浮动 -- 西风陶陶

China to Keep Yuan Policy for 'Long Time'

Sun Mar 7, 2004 10:03 PM ET

BEIJING (Reuters) - China's fixed currency policy will stay around for "a long time to come" and Chinese firms that bet on a yuan appreciation will end up paying a heavy price, the country's foreign exchange chief said.

In an unusually strong defense of the yuan's long-standing peg to the dollar, Guo Shuqing, head of the State Administration of Foreign Exchange, hit back at U.S. critics who have blamed the policy for costing American jobs.

"Our study shows that the impact of the exchange rate on the economy and employment has been over-exaggerated," the Xinhua news agency on Monday quoted Guo as saying.

The United States and others have pressured China to let the yuan (CNY=CFXS: Quote, Profile, Research) appreciate, saying its peg of about 8.28 to the dollar is artificially low and thus makes Chinese goods cheaper on world markets.

Guo said China's biggest advantage was not the currency but relatively low wages in the manufacturing sector, which were only three percent of those in the United States.

"China's managed floating exchange rate system conforms to the realities of China and it will continue for a long time to come," Xinhua quoted Guo as saying.

Over the past few days, amid the annual session of the National People's Congress, or parliament, Guo has emerged as a de facto spokesman on the currency, making a string of statements defending the peg while holding out the prospect of gradual reform.

WARNING TO SPECULATORS

On Saturday, Guo said China's capital account may be mostly open within five to six years, but that reform of ailing banks would have to be completed first.

His remarks published on Monday held the line that the fixed currency was good for China's economy, which grew a blistering 9.1 percent last year but is beset by problems such as debt-laden banks and rising unemployment.

Guo also warned domestic firms against betting on a yuan appreciation, citing economic conditions which could cool upward pressure on the currency.

"Betting on an RMB appreciation is likely to (end up in paying) an enormous price," it quoted Guo as saying.

Speculation has mounted that Beijing may be considering widening the yuan's wafer-thin trading band or re-pegging it to a basket of currencies given domestic economic conditions, a move which would deflect U.S. pressure for a yuan revaluation.

Analyst say re-pegging the yuan to a basket of currencies, rather than just the U.S. dollar, this year could allow the currency to appreciate by between three and six percent.

But Guo's latest comments poured cold water on that theory.

A global economic recovery could lead to an outflow of U.S. dollars and an easing of China's vast foreign exchange reserves, which stood at nearly $416 billion at the end of January, second only to Japan's.

A likely interest rate hike by the U.S. Federal Reserve this year would narrow the gap with yuan rates, relieving pressure on the currency to appreciate, Xinhua said.