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Playing the Markets

Isn't this kind of the plan behind Alan Greenspan's job? Why the indignant tone?

China denies manipulating its currency

The Associated Press
9/1/2003, 11:55 p.m. PT

BEIJING (AP) China is not manipulating its currency and will not give in to "international browbeating" to change its foreign-exchange policy, the government's main English newspaper said Tuesday as the U.S. treasury secretary arrived for a visit.

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The China Daily, in its top opinion piece, took issue with critics who say the country is pulling strings with the yuan in a protectionist attempt to help Chinese-based exporters sell inexpensive products.

"The critics that believe China manipulates the yuan's value assume that every currency in the world should be floated in the market," China Daily said. "This assumption in itself is porous."

It added: "Should China now give in to pressure only to face dire consequences later? No way."

The commentary, in a forum considered China's primary English-language conduit to world opinion, came as U.S. Treasury Secretary John Snow began a two-day visit to Beijing. The yuan issue was expected to come up during a meeting with Zhou Xiaochuan, China's central banker.

Snow made no comment Tuesday as he arrived at his Beijing hotel other than saying he expects talks with Chinese officials to go well.

China's central bank has kept the yuan known also as the renminbi, or "people's money" fixed at about 8.28 to the dollar since 1994. It is allowed to fluctuate, but only in a tight band a fraction of 1 percent and only in closely regulated trading by those who have cleared official hurdles.

In Japan on Monday, Snow and Japanese Finance Minister Masajuro Shiokawa agreed to encourage but not pressure China to allow its currency to appreciate.

"China seems to be keeping the yuan fixed and this is not competitive from an international financial viewpoint," Shiokawa said Tuesday in Tokyo. "I agreed with Secretary Snow that China should let the yuan float."

In recent weeks, China has taken some steps toward a slightly more flexible exchange rate, including increasing reserve requirements for commercial banks and loosening certain capital account restrictions.

"It is important we retain flexibility in currency markets so U.S. manufacturers are not disadvantaged," Snow said in Japan. "My long-held view is that a well-functioning international financial system is one based on flexible exchange rates determined in competitive markets."

China Daily took a darker view.

"A more undesirable consequence might be the impression that international browbeating can effectively mandate China's forex (foreign exchange) policy," the newspaper said.

The yuan doubtless will be an important issue later this week at a meeting of the 21-member Asia Pacific Economic Cooperation Forum, which will be attended by Snow, Shiokawa and China's Finance Minister Jin Renqing.

Ahead of that, other state-controlled Chinese-language newspapers also ran pieces Tuesday, apparently part of an attempt to take issue with what China perceives as interference in its currency policies.

For nearly a decade, Beijing has kept its currency from trading in global markets a strategy that brought stability and helped shield China from the 1997 Asian financial crisis. But as exports surge, China is facing growing demands to raise the value of the yuan.

Washington and other governments complain the currency is too cheap and gives Chinese exports an unfair advantage, hurting foreign companies and wiping out jobs in countries trying to compete with China.

Officials in China say they have no immediate plans to alter the exchange rate or let the yuan trade freely. But they are looking at ways to overhaul currency controls to help the country's businesses and to lessen foreign pressure for a stronger yuan.

Copyright 2003 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
This material may not be published, broadcast, rewritten, or redistributed.