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November 17, 2009

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Home » Business » Economy

China to hold line on rate of yuan-US$

CHINA'S Ministry of Commerce yesterday rebuffed calls to allow the national currency to appreciate and said it's unfair to blame the yuan for global trade imbalances.

"It is not conductive to the global economic recovery, and it's also unfair to single out one country for currency appreciation while the US dollar is losing value at the same time," ministry spokesman Yao Jian said yesterday in Beijing.

He pointed out that China has stabilized its currency and is contributing to the recovery of the global economy.

The yuan has been flat at about 6.83 to the US dollar since the middle of 2008. Economists termed the situation a "repeg to the dollar" that followed the July 2005 declaration that China was removing the yuan's direct link to the greenback and replacing it with a basket of currencies.

IMF pressure

There have been some slight signs of appreciation recently, however, as the yuan traded at around 6.827 to the US dollar yesterday.

The latest call for a stronger yuan came yesterday from International Monetary Fund Managing Director Dominique Strauss-Kahn.

He said a more valuable Chinese currency is part of a package of reforms China needs to make, although he did praise the country's role in battling the global downturn. The IMF projects that China's economy will grow 8.5 percent this year and 9 percent in 2010.

Yao said it's baseless to consider China and East Asian countries only as exporters, and it's unfair to blame global imbalances on Chinese shipments to the world.

China continued to import large amounts of US goods even during the global financial crisis, and the yuan's exchange rate has little to do with China's trade surplus, Yao said.

China is shifting its economic growth from a reliance on exports to domestic consumption. Domestic consumption now contributes to more than half of China's economy, he said.

"We must provide a stable and predictable environment for our enterprises, including macroeconomic policy and currency policy," Yao said.

Even so, economists said they expect the yuan to increase its appreciation pace early next year, when China's exports stabilize and the global economic recovery solidifies.


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