By Rob Delaney and Simon Kennedy
Jan. 27 (Bloomberg) -- People’s Bank of China Deputy Governor Zhu Min defended his country’s “stable” yuan policy and warned that dollar volatility is threatening a global economic recovery.
“It’s absolutely important to have rmb stability. It’s good for China. It’s also good for the world” Zhu said in a panel discussion at the World Economic Forum in Davos, Switzerland. Rmb is an abbreviation for renminbi, the yuan’s formal name.
“Everybody understands that because of the U.S. dollar carry trading, all this money was brought into the emerging market, and someday if U.S. monetary policy changes, this money will go back to the U.S. market,” Zhu said.
China is fighting criticism from countries, including the U.S., that it’s keeping the yuan’s value artificially low, making it more difficult for exporting nations to compete. China has kept a lid on its currency since July 2008 after it strengthened 21 percent against the dollar over the previous three years.
“I think they have been excessively self-interested. I think they’ve been very uncooperative,” Barney Frank, chairman of the U.S. House Financial Services Committee, said of China’s currency policy. Frank was on the same panel as Zhu and made his comments to reporters afterwards.
Yuan Peg
China’s economy rebounded stronger than anticipated in the fourth quarter, and the inflation rate accelerated to a 13-month high of 1.9 percent in December, igniting speculation the government will abandon the yuan peg to avoid the economy from overheating.
The Chinese government may allow the yuan to have “a bigger one-off move than people talk about, at least 5 percent, maybe more,” Goldman Sachs Group Inc. Chief Economist Jim O’Neill said in a Jan. 23 interview. “They may also consider having a wide band to let it move more frequently on the daily basis to stop speculative players.”
To contact the reporter on this story: Rob Delaney in Davos at robdelaney@bloomberg.net
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