Zhou Says China Will Keep Yuan Stable at ‘Appropriate Level’

By Nipa Piboontanasawat

Feb. 10 (Bloomberg) -- China will keep its exchange rate stable at an appropriate level, central bank Governor Zhou Xiaochuan said.

“There is no new strategy on the exchange rate,” Zhou said today in an interview in Kuala Lumpur. “It’s the same as before -- the exchange rate will be determined by market supply and demand against a basket of currencies. It will be kept stable at an appropriate, balanced level.”

The central bank has halted the yuan’s gains against the dollar since July as the global recession sends the nation’s exports tumbling. U.S. Treasury Secretary Timothy Geithner said last month that the new administration believes China is “manipulating its currency.”

Zhou declined to say whether China has room to cut interest rates. “Now is not a good time to answer this question,” he said.

“We have to see to what extent the global financial crisis will worsen,” Zhou said, when asked whether China will face deflation.

China’s currency has gained 21 percent against the dollar since the nation ended a fixed exchange rate in 2005. It closed yesterday at 6.8338 per dollar.

China should “actively guide” the yuan’s exchange rate to about 6.93 against the dollar to help maintain economic growth and bolster employment, according to a report by the Ministry of Finance’s research institute, published Feb. 7.

To contact the reporter on this story: Nipa Piboontanasawat in Hong Kong at npiboontanas@bloomberg.net