LexisNexis(TM) Academic - Document
Copyright 2005 The Financial Times Limited
Financial Times (London, England)
July 22, 2005 Friday
London Edition 1
SECTION: RENMIMBI REVALUATION; Pg. 10
LENGTH: 608 words
HEADLINE: US Treasury welcomes currency reform WASHINGTON REACTION:
BYLINE: By ANDREW BALLS and ALAN BEATTIE
DATELINE: WASHINGTON and LONDON
BODY:
The US Treasury yesterday warmly welcomed China's currency reform, stressing that the new arrangement would eventually allow for significant revaluation.
China's announcement of an initial 2.1 per cent revaluation and its shift to a managed float against a basket of currencies, similar to Singapore's currency system, follows a long campaign by Washington for a more flexible Chinese currency.
The Treasury claimed the new regime would allow the renminbi to rise by 0.3 per cent per day against the dollar, although it was not clear this was a correct interpretation of the Chinese authorities' statement.
John Snow, Treasury secretary, said: "I greatly welcome their commitment to using market forces, to relying on market forces to bring the currency into alignment with underlying demand and supply forces."
The move can be seen as a personal triumph for Mr Snow, whose efforts over the past two years have been criticised by Congress as ineffective. He has long maintained that too much external pressure would make it harder for those who favoured currency reform in Beijing to win internal political battles on the issue.
Last month Mr Snow, together with Alan Greenspan, Federal Reserve chairman, convinced senators Charles Schumer and Lindsey Graham to postpone a vote on their bill to impose a 27.5 per cent tariff on Chinese imports, with Mr Snow saying he thought a move by China on its currency was imminent.
"I think you need to give credit to John Snow and his colleagues for having persistently pursued this agenda," said William Rhodes, senior vice-chairman of Citigroup. "However . . . what counts is that China did this in China's own interests. Although the initial amount is modest, what is important is that this system has been established."
Mr Greenspan told the Senate banking committee yesterday: "I look at it as the first step in a number of further adjustments as they invariably increase their participation in the world trading markets."
A small shift in China's exchange rate against the dollar will have very little impact on the US trade deficit.
But the prospect of much greater movement over time, and a broader shift towards greater currency flexibility by other governments in Asia, is part of the recipe for a rebalancing of global growth laid out by the US and its Group of Seven partners, the International Monetary Fund and others.
The IMF said yesterday that China should not limit the renminbi's movements within the new framework it had announced.
"We would encourage the authorities to utilise fully the scope for flexibility in the new exchange rate arrangement," it said.
In the US, the Chinese currency has been the focus of congressional anger and protectionism, which yesterday's move should help to restrain.
"The traditional pattern is for the administration to be the free-trade anchor and Congress to tug it towards protectionism," said Tom Gallagher, head of policy research for the ISI Group, a Washington consultancy. "This move is probably just enough to stop the anchor shifting."
China's revaluation of its currency, and particularly the adoption of a new regime that will allow easier adjustments in future, may take the edge off some of the protectionist sentiment that has helped to slow progress in the Doha round of global trade talks.
There may be less of an impact in Europe, which participants say has proved to be one of the more reluctant participants in the Doha round. China's hyper-competitive exporters have caused alarm over job losses in Europe, particularly in textiles.
But the EU is running a much smaller overall current account deficit than the US, and the eurozone is running a surplus.
LOAD-DATE: July 21, 2005
Financial Times (London, England)
July 22, 2005 Friday
London Edition 1
SECTION: RENMIMBI REVALUATION; Pg. 10
LENGTH: 608 words
HEADLINE: US Treasury welcomes currency reform WASHINGTON REACTION:
BYLINE: By ANDREW BALLS and ALAN BEATTIE
DATELINE: WASHINGTON and LONDON
BODY:
The US Treasury yesterday warmly welcomed China's currency reform, stressing that the new arrangement would eventually allow for significant revaluation.
China's announcement of an initial 2.1 per cent revaluation and its shift to a managed float against a basket of currencies, similar to Singapore's currency system, follows a long campaign by Washington for a more flexible Chinese currency.
The Treasury claimed the new regime would allow the renminbi to rise by 0.3 per cent per day against the dollar, although it was not clear this was a correct interpretation of the Chinese authorities' statement.
John Snow, Treasury secretary, said: "I greatly welcome their commitment to using market forces, to relying on market forces to bring the currency into alignment with underlying demand and supply forces."
The move can be seen as a personal triumph for Mr Snow, whose efforts over the past two years have been criticised by Congress as ineffective. He has long maintained that too much external pressure would make it harder for those who favoured currency reform in Beijing to win internal political battles on the issue.
Last month Mr Snow, together with Alan Greenspan, Federal Reserve chairman, convinced senators Charles Schumer and Lindsey Graham to postpone a vote on their bill to impose a 27.5 per cent tariff on Chinese imports, with Mr Snow saying he thought a move by China on its currency was imminent.
"I think you need to give credit to John Snow and his colleagues for having persistently pursued this agenda," said William Rhodes, senior vice-chairman of Citigroup. "However . . . what counts is that China did this in China's own interests. Although the initial amount is modest, what is important is that this system has been established."
Mr Greenspan told the Senate banking committee yesterday: "I look at it as the first step in a number of further adjustments as they invariably increase their participation in the world trading markets."
A small shift in China's exchange rate against the dollar will have very little impact on the US trade deficit.
But the prospect of much greater movement over time, and a broader shift towards greater currency flexibility by other governments in Asia, is part of the recipe for a rebalancing of global growth laid out by the US and its Group of Seven partners, the International Monetary Fund and others.
The IMF said yesterday that China should not limit the renminbi's movements within the new framework it had announced.
"We would encourage the authorities to utilise fully the scope for flexibility in the new exchange rate arrangement," it said.
In the US, the Chinese currency has been the focus of congressional anger and protectionism, which yesterday's move should help to restrain.
"The traditional pattern is for the administration to be the free-trade anchor and Congress to tug it towards protectionism," said Tom Gallagher, head of policy research for the ISI Group, a Washington consultancy. "This move is probably just enough to stop the anchor shifting."
China's revaluation of its currency, and particularly the adoption of a new regime that will allow easier adjustments in future, may take the edge off some of the protectionist sentiment that has helped to slow progress in the Doha round of global trade talks.
There may be less of an impact in Europe, which participants say has proved to be one of the more reluctant participants in the Doha round. China's hyper-competitive exporters have caused alarm over job losses in Europe, particularly in textiles.
But the EU is running a much smaller overall current account deficit than the US, and the eurozone is running a surplus.
LOAD-DATE: July 21, 2005
posted by Eastlaw at Friday, July 22, 2005
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