China says it will move cautiously on currency
China's central bank governor acknowledged Saturday that Beijing is using its controversial exchange-rate controls to cope with the global economic crisis and said it will be cautious about retreating from the policy, AP reported.
Gov. Zhou Xiaochuan's comments come as Beijing faces rising pressure to ease controls that Washington and other trading partners say keep its yuan undervalued, swelling its trade surplus. President Barack Obama says he will press for an end to currency systems that he says depress export prices and hurt American companies.
At a news conference during the annual meeting of China's ceremonial legislature, Zhou said a "special foreign exchange mechanism" is part of Beijing's crisis response. China has held the yuan steady against the dollar since late 2008 in an apparent effort to help China's exporters compete abroad, though authorities have never openly confirmed that.
Obama vowed last month to "get much tougher" with China in trade disputes. Some American companies are pressing Congress to enact punitive tariffs on Chinese goods if Beijing fails to act. Critics say the yuan is undervalued by up to 40 percent.
"Under crisis conditions, we do not rule out the possibility of adopting special policies, including special foreign exchange mechanism. This is part of the package of policies to deal with the global financial crisis," Zhou said at a news conference.
He said that while such a policy would be "withdrawn sooner or later," the global outlook is still uncertain and the foundation of a recovery is not certain.
"If we say we withdraw from nonconventional policy and return to conventional economic policy, we must be very cautious and discreet in choosing the timing. This also includes the renminbi exchange rate policy," Zhou said, referring to the yuan by its other official name.
Zhou gave no indication when Beijing might allow the yuan to rise, repeating Premier Wen Jiabao's statement Friday that it would be kept basically stable.
The yuan's value was tied to the dollar for decades, but Beijing broke that link in 2005 and allowed the currency to rise by about 20 percent through late 2008. That rise was halted after the global crisis hit.
Appearing at the news conference with Zhou, Commerce Minister Chen Deming said exports might not recover to pre-crisis levels for two to three years due to "uncertain and unstable" global conditions.
"It could take two to three years to recover to the 2008 level," said Chen. "Proceeding from the high unemployment and low deposit rates in the epicenter of the financial tsunami, the world consumer market and real recovery of China's exports require time."