China Says It Will Keep Currency Stable
Scott Mcdonald
"The meeting believed that China should ... actively expand domestic demand, reasonably control the growth of the investment and improve the trade balance," said the statement on the bank's Web site, issued after a fourth-quarter meeting on monetary policy.
China has been under pressure to do something about the value of its currency, with many politicians in Washington and U.S. business leaders saying Beijing keeps the yuan undervalued, giving its exporters an unfair price advantage and hurting foreign companies.
The U.S. trade deficit with China is on track to hit $229 billion for 2006, far above last year's record $202 billion.
The U.S. visit earlier this month, headed by U.S. Treasury Secretary Henry Paulson and including U.S. Federal Reserve Chairman Ben Bernanke, ended with China saying it would pursue currency flexibility, but it gave no timetable or details.
Monday's four-paragraph central bank statement was similarly noncommittal, saying "the meeting also believed that China should continue to implement prudent monetary policy, keep price stability, reasonably control credit growth, and keep the basic stability of the currency rate of the yuan."
In July 2005, China revalued the yuan by 2.1 percent to 8.11 yuan per dollar. Since then, it has gained about 3.5 percent against the dollar, but U.S. officials say that is not enough.
Chinese leaders say they want to encourage domestic consumption in order to reduce the country's dependence on export-driven manufacturing industries and investment, but retail sales and other measures of consumer spending are growing much more slowly than exports.
China says its global trade surplus this year should be at least $168 billion. Beijing's overall surplus is smaller than its gap with the United States because China runs deficits with other countries.
Economists say such imbalances cannot continue and that they threaten the stability of the world economy.
Thailand's Finance Minister, Pridiyathorn Devakula also called Sunday for China to allow its currency to rise against the dollar, saying the weak Chinese currency hurts its export competitors.