China refused to buckle under pressure from the United States to strengthen its currency on Wednesday, saying only that a flotation of the renminbi on the world markets was desirable at some point in the future.
The vague statement was only a small comfort to US Treasury Secretary John Snow, who was in Beijing to raise the concerns of American manufacturers that the undervalued currency was destroying US jobs by giving an unfair advantage to Chinese exports.
Shrugging off such concerns, the Prime Minister, Wen Jiabao, stressed the need for continuity rather than change.
”Maintaining the stability of the exchange rates of the renminbi benefits both China and the US,” Xinhua news agency quoted him as telling Snow.
Beijing’s leaders say China’s fast-developing economy is still too immature for the renminbi to be released from its tight peg of 8,3 to the dollar, from which it has barely fluctuated in the past decade. Once the transition from a central planned communist system to a market economy is nearer completion, they say a flotation would be desirable.
Analysts say this could take more than 10 years, which will be of little political use to the Bush administration, which is gearing up for a presidential election next year with domestic unemployment — and foreign trade — likely to be high on the agenda.
Snow put a positive spin on the outcome of his visit.
”The objective here is to get China to move toward a free-floating currency,” he said, after meeting the finance minister and central bank governor. ”I was encouraged to see Chinese leaders reaffirm that goal.”
China’s central bank governor, Zhou Xiaochuan, said the solution to the US’s problems was to boost exports to China rather than meddle with exchange rates.
”It is too early to reach a conclusion on whether the renminbi’s value is undervalued or overvalued; therefore it is unwise to make adjustments based on such an assumption,” he said.
In a sign of further small concessions in the future, however, he said China would consider whether to tie the renminbi to a basket of currencies rather than just the dollar.
During Mr Snow’s visit, China’s state-controlled press kept up its vitriolic attack on the US’s interference and lack of gratitude for Beijing’s decision not to devalue during the 1997-98 Asian financial crisis. — Guardian Unlimited Â