|
 China's Central Bank Governor Zhou Xiaochuan said on the sidelines
of annual high-level talks between the two nations that China will
"significantly" reduce its yuan intervention when some prerequisites
are met. He did not give further details.
Analysts said Zhou's unusual candor about China's currency
intervention, which was echoed earlier on Wednesday by the Chinese
finance minister, suggested that China may be ready to let the yuan
rise again once there are signs of stabilization in its economy.
Indeed, U.S. Treasury Secretary Jack Lew told reporters at the end
of talks on Thursday that China was committed to reducing its
interference with the yuan, "as conditions permit". He said China
was also increasing the transparency of its currency policy.
"The direction of our reforms is clear: we hope that the exchange
rate can be kept basically stable, at a reasonable and balanced
level through reforms," Zhou told reporters at a briefing on the
sidelines of the Strategic and Economic Dialogue on Thursday.
"At the same time, we will allow market supply-and-demand to play a
bigger role in determining the exchange rate, expand the floating
range of the exchange rate, and increase the exchange rate's
flexibility."
"This means that as the goals are being achieved and when conditions
are ready, the central bank will significantly reduce its
intervention in the foreign-exchange market."
The value of the yuan has long strained bilateral relations between
China and the United States. In June, the International Monetary
Fund judged the currency to be "moderately undervalued."
U.S. officials say China deliberately holds down its currency to
boost its exports, an accusation China denies.
Instead, Chinese authorities weld their currency policy to the idea
of stability, a stance that analysts say stems from China's fear of
reliving Japan's experience in the 1980s, when a sharp rise in the
yen hobbled the Japanese economy.
The yuan was again a matter of contention at this year's Sino-U.S.
talks, with Lew telling his Chinese counterparts from the start that
a move to a market-determined exchange rate was a "crucial step" for
China.
In response, Chinese Finance Minister Lou Jiwei said on Wednesday
that Washington constantly raises the issue of whether Beijing can
stop its yuan intervention. But Lou said it was difficult for China
to be hands off given its unsteady economy and abnormal capital
inflows.
"It feels like there was a fairly concrete discussion this time,"
said Louis Kuijs, an economist at RBS Bank in Hong Kong. "They are
saying that we would like to stop intervening, but now is not the
time yet."
[to top of second column] |
"I think in the eyes of Beijing, once the concerns of economic
growth are convincingly removed, there would be less resistance to
letting the exchange rate appreciate."
NOT A COMPLETE HALT
The yuan has fallen 2.4 percent so far this year as China's economic
growth ground to an 18-month low in the first quarter. There are
signs that activity is picking up again, though not as quickly as
some had hoped.
The ninth-most traded currency in the world, the yuan is kept on a
tight leash by China compared with its peers. The central bank sets
a midpoint value for the yuan every day, from which it is allowed to
rise or fall two percent in the spot market.
Before the yuan's retreat this year, China's central bank repeatedly
said that it had ceased its currency intervention, and that the yuan
was near its equilibrium level.
Foreign exchange traders, however, said they still saw the People's
Bank of China buying or selling the currency in sizable quantities
through state banks on the market.
"China is sending a clearer message: it's unlikely for China to
completely stop (yuan) intervention under the managed float regime,"
said Zhang Yongjun, a senior economist at China Centre for
International Economic Exchange, a well-connected think tank in
Beijing.
China's Zhou also signaled that it was not feasible for Chinese
authorities to remain entirely on the sidelines of the foreign
exchange market.
"If short-term market volatility or speculative forces are too big,
we should take appropriate measures," he said in reference to
gyrations in the foreign exchange market.
(Additional reporting by Lesley Wroughton and Michael Martina;
Writing by Koh Gui Qing; Editing by Jacqueline Wong)
[© 2014 Thomson Reuters. All rights
reserved.] Copyright
2014 Reuters. All rights reserved. This material may not be
published, broadcast, rewritten or redistributed. |
