Sunday, April 24, 2005

Economy_Revaluing the yuan, for the sake of economy or the politics?

Central bank governor Zhou Xiaochuan's words in a recent forum, was reported as the chance for China to speed up move to revalue the yuan, though the political pressure from the outside has soften these days.

``If there is more pressure from outside, it will force us to speed up our reform,'' Zhou said at the Boao Forum in southern Hainan island yesterday, reported Bloomberg. Zhou said China welcomes international pressure because it will force the nation to speed up needed financial reforms. Still, ``we don't see that the pressure is that strong right now,'' he said.

Two days before, Federal Reserve Chief Alan Greenspan said China should loose the peg between yuan and U.S. dollar for China's good sake, without saying the peg caused the large deficit of U.S.. He said the economic pressure said
the growing economic pressure will compel China to alter its policy of pegging its currency to the U.S. dollar at some point, and the sooner it happens the better. "The sooner they move off this fixed (rate), the better off for China's economy." Reuter reported.

The manufacturers in U.S. and other countries has argued that the peg of yuan to U.S. dollar gives an unfair disadvantage for Chinese products selling overseas.
U.S. Treasury Secretary John Snow repeated at the same day that the new, tougher administration line on China, saying the country has taken the necessary steps to handle a flexible currency now.

"Hard fist first, and then soft words", says an old Chinese saying. That's what the nations who want to push China loose the peg did.

3 comments:

無塵工作室 said...

Economy of course, but it also depends on how long the Chinese government can handle pressure from the international community...and judging from the most recent Sino-Japanese row, I think they can hold on for quite some while. :)

Amy or koala said...

hehe, smart boy.

Victor said...

Stability is the key.

The PRC remains a export-oriented country. Once the yuan revalues, it would negatively impact its export, and in turn GDP growth.

The country is correcting this situation by shifting part of the focus to internal consumption. Through this, the reliance on export can be reduced. How to narrow the wealth gap is also the key task for Premier Wen.

Pressure from the EU, and even Japan and the US, is not be the major worry. The PRC has gained support from most Asian, African, the Middel East, and some Americas (except the US) countries.