| China said on Friday upward pressure on its rigid
yuan currency was not so great and urged speculators betting on an imminent
revaluation to be patient.
Vice Finance Minister Li Yong told participants at the annual meeting of the
Asian Development Bank (ADB) in Istanbul that he believed the pressure for the
currency to appreciate stemmed from domestic, not external, factors.
"I don't feel the upward pressure is that strong. I feel the pressure is not
from the outside but from domestic needs," he said.
 |
| Financial Minister Jin Renqing answers question at a press
conference of the third plenary meeting of the 10th National People's
Congress on March 9, 2005.
[newsphoto] | Li reiterated there was no
timeframe for floating the yuan and said establishing market mechanisms and
pushing financial sector reform were pre-requisites for a change in the currency
regime.
Some analysts say rather than U.S. pressure, it is China's uphill battle to
tame its overheading economy that has raised the chances of a long-awaited yuan
appreciation this year, which could spark a rally in Asia's carefully managed
currencies.
Li said China would take into account the impact on regional and global
economies in reforming the yuan.
China's Finance Minister Jin Renqing on Wednesday said Beijing was determined
to reform the its currency regime but intense market speculation on the exchange
rate made it very difficult for Beijing to move now.
On Friday, Li pleaded with speculators to be patient. Li said some
speculators were buying yuan-denominated assets hoping their value would go up
by as much as 40 percent in the event of currency appreciation.
"Forty percent is astonishing. I urge them not to do such speculation. They
need patience," he said.
"One big concern to me is that too much hot money is flowing into China."
SPECULATION HOTS UP
Investors placed fresh bets on Friday on a near-term appreciation of the yuan
as Chinese central bankers prepared to meet U.S. Treasury officials and bankers
next week to discuss currency plans, traders said.
The absence of top Chinese central bankers from the Istanbul meeting and
their planned visit to New York has fueled speculation that Beijing is set to
move soon on the yuan.
"In my view, this Sunday (May 8) would be the first 'Golden Opportunity' for
China to move," said Frank Gong of JPMorgan.
"It's a working day for China (the first working day after the "Golden Week"
holidays) when all the other markets are closed... Domestic markets/people can
have the first chance to react to the big news," he said in a research note.
Three-month yuan non-deliverable forward contracts, which investors use to
bet on any change in the yuan's value in the near term, factored in a 2.5
percent appreciation on Friday, compared with 2 percent the day earlier.
The yuan is pegged in a narrow band around 8.28 per dollar. As the dollar has
broadly weakened over the last three and a half years, the falling yuan has made
Chinese exports cheaper.
Li said China shared the concerns of other countries about imbalances which
threaten the global economy. He said China would spend part of its massive
foreign exchange reserves, the world's second largest at over $650 billion, to
support its financial reforms.
"China will spend the necessary resources to support reforms," he said,
citing Beijing's past decisions to inject capital into three state banks as
examples.
Asked if China's surging economy could achieve a soft-landing, he told
Reuters: "That is certainly achievable."
Li also said Beijing would continue adjusting its macro-economic policies as
it tries to cool its economy, which grew at 9.5 percent in the first quarter of
2005.
"(Our 2005 priority) is to strengthen and improve macro-economic management.
We will continue our macro-economic adjustment, which is so important for steady
growth," he said. | 
English
