Tags: China | Economist | Yuan | Move

China Economist: No Quick Yuan Move Despite Easing Rifts

Monday, 05 Apr 2010 02:20 PM

The U.S. decision to delay a ruling on whether China manipulates its currency showed easing tensions over the yuan, but it is too early for China to change its currency policy, a government economist said on Monday.

"I believe this is a positive signal. At least the U.S. side has created some room for further consultations and negotiations," said Huo Jianguo, head of the Commerce Ministry's think-thank.

"But I don't think there will be a yuan adjustment in the near-term. We need to to see whether China's export recovery will be sustained and need to see whether companies can cope with a stronger yuan," he told Reuters.

The ministry's repeated warnings that many firms would be ruined and millions of jobs lost if the yuan strengthened stand in contrast to the central bank's signals that it would welcome a more flexible currency and its dampening effect on inflation.

Analysts believe, however, the two institutions will eventually reach a compromise, possibly as soon as mid-2010.

U.S. Treasury Secretary Timothy Geithner said on Saturday he was delaying an April 15 report on whether China manipulates its currency but pledged to press for a more flexible yuan policy.

The decision follows Thursday's announcement that Chinese President Hu Jintao will attend a nuclear security summit meeting in Washington April 12-13 and seems to be a move to keep tensions over currency in check.

Huo said many Chinese exporters oppose a stronger currency out of fear that their thin profit margins could be wiped out.

Any yuan policy change would ultimately depend on China's own economic interests, although the impact on other countries would also be taken into account, he said.

China's exports jumped 45.7 percent in February from a year earlier but the growth may have been exaggerated by the low base, while imports were growing at a faster clip due to robust domestic, slashing the trade surplus, he said.

Huo echoed recent official forecasts that that China could post a small trade deficit in March, the first since 2004.

"This may help ease upward pressure on the yuan. We need to watch whether the trade deficit is short-lived or it's a turning point," Huo said.

© 2015 Thomson/Reuters. All rights reserved.

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