China firm on keeping yuan stable

| April 14, 2010 | 0 Comments

At the Nuclear Security Summit in Washington, Chinese President Hu Jintao told US President Barack Obama that China is committed to yuan reform but will not be pressurised into making changes to its currency peg.

The Chinese President added that while Beijing is willing to make changes, it will do it on its own terms.

Hu told Obama: “China will firmly stick to a path of reforming the yuan’s exchange rate formation mechanism.

“In making reforms, we will give careful consideration to global economic developments and changes, as well as to China’s economic condition.”

The comments come just a one month after China denied its Government was keeping the yuan undervalued after lawmakers and economists said it is hampering a global recovery.

Keeping the yuan stable is “an important contribution” to global recovery said China.

US legislators and trade groups say the yuan, which is also referred to as the renminbi, is kept up to 40% below what its value should be against the US dollar.

The Chinese currency pegged the US dollar until 2005 when it was allowed to rise in value by about one fifth.

The peg was reinstated in July 2008 when the global financial crisis took hold, amid US concerns of the impact on trade.

China has been under pressure to allow the yuan to find its own level in order to ease inflation, which is at a 16-month high.

However, US trade figures released yesterday revealed the lowest deficit with China in nearly 12 months, narrowing to $16.5 billion in February.

Imports from China slumped by 7.2% to $23.4 billion and according to analysts, the fall may give President Hu the room to defer the revaluation of the yuan.

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