Beijing Studies Severing Dollar Peg
March 8th, 2010Via: Financial Times:
China’s central bank chief laid the groundwork for an appreciation of the renminbi at the weekend when he described the current dollar peg as temporary, striking a more emollient tone after months of tough opposition in Beijing to a shift in exchange rate policy.
Zhou Xiaochuan, governor of the People’s Bank of China, gave the strongest hint yet from a senior official that China would abandon the unofficial dollar peg, in place since mid-2008. He said it was a “special” policy to weather the financial crisis.
“This is a part of our package of policies for dealing with the global financial crisis. Sooner or later, we will exit the policies.”
Mr Zhou’s comments contrasted with recent Chinese comments on its currency policy in the face of international criticism that the renminbi was undervalued. In December, premier Wen Jiabao said: “We will not yield to any pressure of any form forcing us to appreciate.” Chinese officials have repeatedly emphasised the need for a stable exchange rate.
However, while the recent increase in consumer prices in China has strengthened the hand of those officials who think the currency should now rise, it is not clear that this argument has yet won over the country’s senior leaders.
Indeed, Mr Zhou gave no hint about the possible timing of a shift in policy.
Chen Deming, commerce minister, said the outlook for international trade remained “uncertain and unstable” and that it would take two or three years before Chinese exports recovered to pre-crisis levels.
