United States Treasury Secretary John Snow drummed home the message on Wednesday that China’s ad-hoc financial system needs greater reform if the world’s fastest-growing economy is to fulfil its great economic potential.
”It’s clear again the potential for the financial sector to play a larger role in China’s economy is enormous,” Snow told reporters during a brief visit to the Shanghai Stock Exchange.
”To realise that potential, a number of reforms have to be adopted,” Snow said, highlighting a larger role for foreign financial firms, corporate governance and modernised financial products such as derivatives.
Snow is touring China ahead of a key meeting in Beijing this weekend of the Group of 20 larger developing countries and rich nations.
While Snow has in the past praised China for its recent currency-reform measures, his visit to China’s economic hub of Shanghai — and later on Wednesday the south-western city of Chengdu — is clearly aimed at ensuring China is pushing ahead with further promised reforms to the currency.
”We’re going to encourage continued progress on those reforms,” the US Treasury chief said ahead of meetings in Beijing with Chinese leaders.
China’s major trading partners, the US and the European Union in particular, have long held that the yuan is unfairly undervalued, giving Chinese exports a competitive advantage and triggering imbalances in world commerce.
Under pressure to allow the yuan to float more freely, China delinked the yuan from the dollar, placing it in a managed basket of currencies and revaluing the unit by 2,1%.
Then, ahead of the Group of Seven meeting in Washington in late September, China slightly widened the yuan’s trading band for currencies other than the dollar.
”It is in China’s interest to continue down this path, not to stop, but to continue going forward,” said Snow.
When Snow returns to Beijing on Friday, he and Federal Reserve Chairperson Alan Greenspan will also thrash out an agenda with senior Chinese officials including Minister of Finance Jin Renqing and central bank Governor Zhou Xiaochuan.
In advance of the trip, the Treasury postponed the release of a twice-yearly report on global currency policies that many in Congress say should label China a ”manipulator” of its exchange rate — opening up the threat of US sanctions.
”Currency manipulation is a concept that we continue to review and think about for all countries,” Snow told reporters. — Sapa-AFP