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China steps up foreign exchange efforts
(Agencies)
Updated: 2005-06-14 19:03
SHANGHAI, China-- China has stepped up its efforts to set up a more flexible
foreign exchange regime, fearing that capital being kept overseas could flood
back into the country, the central bank said Tuesday in its annual
report.
The central bank's comments did not suggest any imminent, sudden
change in policy. However, they appear to make a case for urgent reform
of the foreign exchange policies, which keep the Chinese currency, the
yuan, trading within a narrow range around 8.28 yuan per U.S. dollar.
Some of the capital that has left the country in the past decade is
"unstable," and could shift back into China "at any time, putting pressure on
the yuan exchange rate mechanism, buffeting domestic financial markets and
insidiously affecting financial stability," the report said.
The central bank did not say how much money it believed could potentially
flow back into the country. However, it said China recorded net capital outflows
each year from 1994 to 2003. The accumulated net outflow for those years was
1.72 trillion yuan (US$208 billion; euro172 billion), the annual report showed.
The bank said it had intensified studies on setting up a more flexible
foreign exchange system to handle a "reasonable" level of foreign exchange from
companies and individuals.
The United States and other trading partners have
lobbied China to let the yuan's value rise. It has been fixed for the past 11
years. They contend the yuan is undervalued by as much as 40 percent, giving
Chinese exporters an artificial price advantage overseas.
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