LexisNexis(TM) Academic - Document
LexisNexis(TM) Academic - DocumentCopyright 2005 The Financial Times Limited
Financial Times (London, England)
July 27, 2005 Wednesday
London Edition 1
SECTION: ASIA-PACIFIC; Pg. 6
LENGTH: 528 words
HEADLINE: Beijing seeks to cool renminbi revaluation fever
BYLINE: By ANDREW BALLS and MURE DICKIE
DATELINE: BEIJING and WASHINGTON
BODY:
China's central bank has moved to cool expectations of a further revaluation of the renminbi, insisting that last week's 2.1 per cent increase against the dollar had been calculated to leave the currency at a "reasonable and balanced" level.
In a "solemn declaration" that appeared to reflect worries about possible speculative capital inflows, the People's Bank of China said the revaluation and simultaneous scrapping of the dollar peg were initial moves in reforming its currency regime. "This certainly does not mean that the 2 per cent adjustment of the renminbi is a first step that will be followed by further adjustment," it added.
Many investors and analysts have seen last week's renminbi appreciation, which was much smaller than the US and other trading partners had demanded, as a prelude to a more substantial but gradual revaluation.
Zhou Xiaochuan, People's Bank governor, reinforced such expectations on Saturday with remarks to Chinese state television aimed at explaining the "core content" of the revaluation and rate regime reform.
"We have made an initial adjustment to the exchange rate level of 2 per cent," said Mr Zhou, who is widely believed to have pushed for a greater revaluation.
The central bank insisted that Mr Zhou had meant Thursday's revaluation was only an initial step in reform of the exchange rate regime. It blamed foreign media for "creating misunderstanding", but its attempt to recast Mr Zhou's remarks is likely to fuel talk of discord between the governor and other Chinese leaders about renminbi policy.
The People's Bank statement adds considerable weight to warnings by Chinese academics against assumptions of a more significant renminbi appreciation against the dollar. It will cause concern among US manufacturers who had demanded a Chinese revaluation of up to 40 per cent.
The US Treasury yesterday declined to comment on the central bank's statement, reiterating that the new currency arrangements allowed for a significant appreciation over time.
Tony Fratto, US Treasury spokesman, said: "China's reform puts a mechanism in place that allows for greater flexibility over time, determined by market supply and demand forces. We will be closely monitoring the operational performance of this mechanism."
Before last week's announcement, the US Treasury, in discreet contacts, told Beijing that a revaluation of at least 10 per cent would be needed to prevent protectionist legislation in Congress. But after much financial diplomacy, the US Treasury does not want to engage in a public sparring match with Beijing.
The central bank statement is unlikely to end expectations of further renminbi appreciation. Yesterday in Singapore, one-year non-deliverable dollar forwards - instruments that allow bets on non-freely-convertible currencies - traded at levels implying a rise from its post-revaluation Rmb8.11 to the dollar to Rmb7.735 in a year's time.
On China's central bank-dominated foreign exchange market, the renminbi ended slightly weaker at 8.1099 to the dollar, down from Monday's close of 8.1097. America must put its house in order before lecturing China, Page 17 Lex, Page 18 Currencies, Page 39 www.ft.com/renminbi
LOAD-DATE: July 27, 2005
Financial Times (London, England)
July 27, 2005 Wednesday
London Edition 1
SECTION: ASIA-PACIFIC; Pg. 6
LENGTH: 528 words
HEADLINE: Beijing seeks to cool renminbi revaluation fever
BYLINE: By ANDREW BALLS and MURE DICKIE
DATELINE: BEIJING and WASHINGTON
BODY:
China's central bank has moved to cool expectations of a further revaluation of the renminbi, insisting that last week's 2.1 per cent increase against the dollar had been calculated to leave the currency at a "reasonable and balanced" level.
In a "solemn declaration" that appeared to reflect worries about possible speculative capital inflows, the People's Bank of China said the revaluation and simultaneous scrapping of the dollar peg were initial moves in reforming its currency regime. "This certainly does not mean that the 2 per cent adjustment of the renminbi is a first step that will be followed by further adjustment," it added.
Many investors and analysts have seen last week's renminbi appreciation, which was much smaller than the US and other trading partners had demanded, as a prelude to a more substantial but gradual revaluation.
Zhou Xiaochuan, People's Bank governor, reinforced such expectations on Saturday with remarks to Chinese state television aimed at explaining the "core content" of the revaluation and rate regime reform.
"We have made an initial adjustment to the exchange rate level of 2 per cent," said Mr Zhou, who is widely believed to have pushed for a greater revaluation.
The central bank insisted that Mr Zhou had meant Thursday's revaluation was only an initial step in reform of the exchange rate regime. It blamed foreign media for "creating misunderstanding", but its attempt to recast Mr Zhou's remarks is likely to fuel talk of discord between the governor and other Chinese leaders about renminbi policy.
The People's Bank statement adds considerable weight to warnings by Chinese academics against assumptions of a more significant renminbi appreciation against the dollar. It will cause concern among US manufacturers who had demanded a Chinese revaluation of up to 40 per cent.
The US Treasury yesterday declined to comment on the central bank's statement, reiterating that the new currency arrangements allowed for a significant appreciation over time.
Tony Fratto, US Treasury spokesman, said: "China's reform puts a mechanism in place that allows for greater flexibility over time, determined by market supply and demand forces. We will be closely monitoring the operational performance of this mechanism."
Before last week's announcement, the US Treasury, in discreet contacts, told Beijing that a revaluation of at least 10 per cent would be needed to prevent protectionist legislation in Congress. But after much financial diplomacy, the US Treasury does not want to engage in a public sparring match with Beijing.
The central bank statement is unlikely to end expectations of further renminbi appreciation. Yesterday in Singapore, one-year non-deliverable dollar forwards - instruments that allow bets on non-freely-convertible currencies - traded at levels implying a rise from its post-revaluation Rmb8.11 to the dollar to Rmb7.735 in a year's time.
On China's central bank-dominated foreign exchange market, the renminbi ended slightly weaker at 8.1099 to the dollar, down from Monday's close of 8.1097. America must put its house in order before lecturing China, Page 17 Lex, Page 18 Currencies, Page 39 www.ft.com/renminbi
LOAD-DATE: July 27, 2005
posted by Eastlaw at Wednesday, July 27, 2005
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