------ Forwarded Message > From: Sardar <sar...@spiritone.com> > Date: Sun, 7 Mar 2010 18:34:47 -0800 > To: Sardar <recon1968br...@yahoo.com> > Subject: China ready to end dollar peg - Telegraph > > China ready to end dollar peg > The head of China's central bank has given the strongest signal yet that the > country will move away from pegging its currency to the dollar, but he said > any changes would be gradual. > > By Garry White > Published: 5:31PM GMT 06 Mar 2010 > > Zhou Xiaochuan, governor of the People's Bank of China Photo: AP > > At the annual session of the legislative National People's Congress in > Beijing, Zhou Xiaochuan, governor of the People's Bank of China, said that > the days of the "special yuan" policy were numbered. He described the dollar > peg as a "temporary" response to the global financial crisis, but gave no > timescale for any change in policy. The currency has been pegged at about > 6.83 yuan per dollar since July 2008. > > > Related Articles > a.. China's political elite alarmed by US money printing > b.. China's Premier: turnaround is not yet real improvement > c.. Diageo in £610m bid for Chinese spirits maker > d.. China risks property bubble as prices rise 20pc > e.. China's credit boom approaches end > f.. Financial crisis: will China help? > Many economists expect China to allow the yuan to appreciate slightly this > year, but the cautious tone by Mr Zhou means that any change may not happen > for some time. He said that the central bank would maintain the "basic > stability" of the currency. So, despite the fact that the Chinese economy > grew by 10.7pc in the fourth quarter of last year, the country's loose > monetary policy looks set to continue. > > "If we are to exit from irregular policies and return to ordinary economic > policies, we must be extremely prudent about our choice of timing," Mr Zhou > said. "This also includes the [yuan] exchange rate policy." > > China's currency policy has been subject of fierce debate, particularly in > the US and Europe, with the country's central bank accused of keeping the > yuan artificially low to promote a domestic exports boom. An artificially > lower currency makes the country's goods and services more competitive, > leaving other exporters at a disadvantage. Jim O'Neil, Goldman Sach's chief > economist, thinks the Chinese should allow their currency to appreciate by > as much as 5pc. > > In recent week President Obama has been vocal on the issue of the > artificially low currency. "China and its currency policies are impeding the > rebalancing [of the global economy] that's necessary," Mr Obama told > Bloomberg last month. "My goal over the course of the next year is for China > to recognize that it is also in their interest to allow their currency to > appreciate because, frankly, they have got a potentially overheating > economy." > > The relative value of the dollar is important to China, as the country is > the world's largest holder of US government debt. According to data form the > US Treasury Department, China held $894.8bn (£591bn) of US Treasury > securities at the end of December. Roughly two-thirds of the country's > reserves are believed to be in dollars and dollar-denominated assets such as > gold. > > "The US dollar is still an extremely important currency, playing a key role > in international trade, cross-border capital flows, direct investment as > well as in determining whether we can smoothly overcome the global financial > crisis," Mr Zhou said. > > When China eventually abandons the peg, the country will have to manage its > exit strategy carefully. If the central bank allows a gradual appreciation > of its currency, which would be the best strategy for its exporters, there > could be an inflow of funds from speculators betting on further > appreciation. However, a one-off revaluation could deal a severe blow to the > country's manufacturing sector. > > a.. > b.. > c.. > d.. > e.. > f.. > g.. > h.. > i.. > j.. > k.. > l.. > m.. Email > n.. Print > http://www.telegraph.co.uk/finance/7386391/China-ready-to-end-dollar-peg.html
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