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Last Updated: Tuesday, 7 October, 2003, 06:40 GMT 07:40 UK
China's PM defends currency peg
Yuan
China will not risk its stability by floating its currency, Mr Wen says
China's Premier Wen Jiabao has insisted that China will not be railroaded into revaluing its currency by pressure from its trading partners.

China's policy of keeping the yuan pegged at roughly 8.28 to the US dollar was "based on market demand and supply and is in line with China's reality," he said.

It showed "a high sense of responsibility towards the international community," he added, speaking in Bali ahead of a summit of the Association of South East Asian Nations (Asean).

China has come under increasing pressure from the United States and other developed countries to let the yuan appreciate, or take the more drastic step of allowing it to float freely.

Wary of concessions

US lawmakers, industrialists and labour unions argue that China's fixed exchange rate undervalues the currency, unfairly cheapens its exports and destroys US jobs.

US Treasury Secretary John Snow called on China to widen the yuan's trading band, thus allowing it to strengthen against the dollar, during a recent visit to China.

The US National Association of Manufacturers is pushing for the US to file a complaint of unfair trade practices against China at the World Trade Organisation.

China's central bank governor answered critics at the G7 summit of industrial nations last month by saying he was willing to consider gradually adjusting the yuan exchange rate, but gave no timescale.

Mr Wen chose a less conciliatory stance.

"To keep the renminbi (yuan) stable at an appropriate and balanced level is conducive to the economic stability not only of China but also of the region and the world at large," he said.

Mr Wen said China would seek an "appropriate" exchange rate "in the course of further economic reform".

Chinese regulators are worried that the banking system is not strong enough to cope with sudden adjustments to the exchange rate.

Mr Wen pointed out that China's exports amount to 5% of the world's total.




SEE ALSO:
Asean leaders agree trade plan
07 Oct 03  |  Asia-Pacific
China defends currency policy
21 Sep 03  |  Business
Chinese banks 'at risk from yuan'
15 Sep 03  |  Business
US talks tough on Asian currencies
05 Sep 03  |  Business


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