China Daily Exclusive

Obama pleased with 'first step' in RMB reform

By Ding Qingfen and Wu Chong (China Daily)
Updated: 2010-06-29 09:27

"Obviously, Obama's message for China is largely driven by internal pressures. I don't think he himself would like to push China too far," said Lu Zhengwei, senior economist at Industrial Bank.

Reports show China will not let the yuan appreciate greatly in the short term, as this will threaten China's efforts to transform its economic growth model and also hurt the global economic recovery.

Nobel laureate Robert Mundell told China Daily: "I don't think it's going to be a good time for China to have a big appreciation. It doesn't matter (for China's economy) if they don't do (appreciate) too much. But if it does a lot, that will hurt China."

Zhao Xijun, deputy dean of the School of Finance at Renmin University of China, also rebutted the US argument that China manipulates its currency.

"I believe how much the renminbi will appreciate is decided by the market. There are many uncertainties with the flotation of renminbi, such as the development of global and Chinese economies, capital flow and trade trends."

Ma Xin, director of the Department of International Cooperation with the National Development and Reform Commission, said on June 27 at a press briefing that "any move on China's foreign exchange regime will be decided by China's own needs for economic development, rather than foreign pressure".

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The US has repeatedly claimed that the value of the yuan has put its exporters at a disadvantage, leading to the huge trade deficit with China, but economists at home and abroad argued there is no direct connection between the foreign exchange rate and the trade imbalance.

China's trade surplus has been falling during the past few months, and in March the nation registered its first trade deficit in 70 months.

Canadian Prime Minister Stephen Harper said in his final press briefing at the G20 that China's announcement that it would continue currency reforms is a "down-payment" on the Framework for Strong, Sustainable and Balanced Growth that the G20 countries launched in Pittsburgh.

China started pegging its yuan to the US dollar at around 6.83 in July 2008 after the currency had risen by 21 percent.

Last week, the yuan gained 0.5 percent, the most since December 2008.

Lan Lan in Beijing contributed to this story.