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Last Updated: Monday, 8 March, 2004, 06:23 GMT
China vows to keep currency peg
100-yuan notes
Hopes in the US that China could make its currency stronger are doomed to disappointment, economic leaders warn.

The yuan is fixed at 8.28 to the US dollar, a low rate which many in the US say costs US jobs.

But despite the US's feverish diplomacy and loud complaints, the peg is here to stay for "a long time to come", China's top foreign exchange official said.

The announcement follows a shift in economic policy to slow down growth and focus on helping the rural poor.

The low level of the yuan is widely believed to have contributed to a blistering 9.1% growth rate last year - a rate which the government now fears is overheating and imbalancing the economy.

A new target of 7% for 2004 was set on Friday by Prime Minister Wen Jiabao, in the hope of avoiding a "boom and bust" cycle.

'Enormous price'

In comments quoted across the Chinese media, State Administration of Foreign Exchange head Guo Shuqing was scathing about the accusations that China's trade is getting an unfair advantage from the yuan.

NEW ECONOMIC GOALS
Growth of 7%, down from 9.1% in 2003
Cut taxes on farmers over next 5 years
Spend $1.2bn on schooling in poor west
For military, develop new, high tech weaponry
Improve public health and sanitation
"Our study shows that the impact of the exchange rate on the economy and employment has been over-exaggerated," he said.

"China's managed floating exchange rate system conforms to the realities of China, and it will continue for a long time to come."

It was China's low wages, not the cheapness of its currency, that gave it a head-start, he insisted.

He also warned companies betting on an early shift and buying that they would suffer for it.

"Anyone betting on a yuan appreaciation is likely to pay an enormous price," he said.




SEE ALSO:
China vows help for rural poor
05 Mar 04  |  Asia-Pacific
US embarks on China yuan mission
23 Feb 04  |  Business
Is China a goldmine or minefield?
19 Feb 04  |  Business
Dollar slide ignores G7 warning
10 Feb 04  |  Business
China mulls move from dollar peg
22 Dec 03  |  Business
US sees red over China trade
09 Dec 03  |  Business


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