China cautions yuan moves
(Reuters)
Updated: 2005-10-13 14:38

Chinese Finance Minister Jin Renqing on Thursday rejected US demands for faster currency reform, saying the country will liberalize the exchange rate in its own time and in line with its own interests.

Chinese Finance Minister Jin Renqing answers a question at a media meeting in Beijing October 13, 2005. [Reuters]

Jin was speaking ahead of a meeting of finance ministers and central bank governors from 20 wealthy and developing nations to be attended by US Treasury Secretary John Snow, who has urged China to move more quickly to let market forces determine the exchange rate of the yuan, or renminbi.

"Using revaluation of the renminbi to resolve global imbalances, particularly the imbalances of certain countries, is impossible and also unnecessary," Jin told reporters in a briefing on G20 issues.

"On the currency issue, China will move forward in a step-by-step manner in line with its goal, but we will not take direction from other people."

He said China, which revalued the yuan by 2.1 percent on July 21 and scrapped its long-standing dollar peg, was reforming its exchange rate system according to its national interests.

"The Chinese government has made clear that it will pursue a market economy and will therefore definitely let the market play a bigger role in determining the exchange rate," Jin said.

But he added: "Any decision will not be based on trade deficits with certain countries but will be based on China's overall trade balance with the rest of the world."

Snow pressed China to let the yuan rise more quickly to help reduce the United States' big trade deficit with China, which reached $162 billion last year.

China did not want an excessively high trade surplus, but was thwarted in its desire to buy more from "certain countries," Jin said, in a thinly veiled reference to U.S. export controls that prevent the sale of some high-tech items to China.

Jin said China did not want a rapid increase in its foreign exchange reserves, which have been building up quickly thanks to the trade surplus, foreign investment, and large inflows of speculative money betting that the yuan will rise in value.

Asked about the make-up of China's reserves, which reached $711 billion at the end of June, Jin said Beijing would continue to invest a good chunk of them in US government bonds.

"A large part of them are being invested in US Treasury bonds. This is the policy that has been set and it will not be changed because it benefits both sides," Jin said.