China Business

Mar 25, 2006

US senators at ease over yuan's reform

BEIJING - Two US senators leading an effort to force trade and currency "concessions" from China say they are now more optimistic about China's currency reform.

"We are more optimistic than we were when we came here," said Charles E Schumer, "We have seen that the Chinese government and the Chinese people actually have a convergence with the American people on currency."

On Thursday, China's central bank said it would increase the "floating flexibility" of the yuan, also known as renminbi or RMB, while keeping it basically stable at a reasonable equilibrium. The People's Bank of China reiterated in a report after its quarterly monetary policy meeting that China would continue to improve its exchange rate mechanism. The yuan strengthened to 8.0250

against the US dollar this week, the highest level since its July 21 revaluation. The Chinese currency has gained more than 3% since July last year.

The senators' visit comes as a March 31 deadline nears for the Senate to vote on a bill written by Schumer and Lindsey Graham that would impose a 27.5% tariff on Chinese goods. The bill is designed to counter what the senators call China's artificial currency exchange rates that benefit Chinese manufacturers at the expense of American producers.

Schumer made his remarks after meeting with Chinese Vice Premier Wu Yi, Central Bank Governor Zhou Xiaochuan and Minister of Commerce Bo Xilai.

Schumer and Graham will also discuss with Chinese top officials issues of trade and intellectual property rights.

"We believe there is real possibility that the Chinese government and Chinese people see it in their interest to let the yuan float," said Schumer, "so we're feeling better."

The two senators said they were pleased to see a passage about currency reform in China's 11th Five-Year Plan text. In the recently released plan, China described its goal for currency reform, saying that it would improve the system of managed floating foreign currency exchange rates.

Also in the 11th Five-Year Plan, the two senators noticed that China had changed its economic policy to do more about "encouraging domestic consumption, and the ratio of consumption to savings should be increased on the consumption side".

It was both to help people in the interior who were not doing as well as those on the coasts and for the future balance of China's growth, said Schumer.

"When I came here I thought the Chinese policy is a sort of accumulating wealth, now I see there is an added dimension," he said.

The two senators said they believed China's currency issue would be solved over a reasonable period of time but when asked about whether the US Congress would vote their bill, Schumer said that "the jury is still out" and "we still need some concrete signs of movements".

In response to a journalist's question on whether China would revalue its currency again, at a press conference at the close of the annual session of China's top legislature one week ago, Chinese Premier Wen Jiabao said, "RMB now boasts the room and capacity for floating up or down by itself in line with current mechanism and market changes."

(Asia Pulse/XIC)

China Travel

China Tours

Yangtze River Cruise

Great Wall of China

China Airline

Map of China

Head Office: Rm 202, Hau Fook Mansion, No. 8 Hau Fook St., Kowloon, Hong Kong
Thailand Bureau: 11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110