Policy

Responsible monetary policies urged

(China Daily/Agencies)
Updated: 2009-11-23 08:02

Countries whose currencies are held as reserves by global central banks are failing to take sufficient account of the global repercussions of their domestic policy stances, Assistant Finance Minister Zhu Guangyao told a financial forum last week in Beijing.

"We call upon major reserve-issuing countries to take responsible monetary policies," Zhu, who was speaking in English, said.

China holds an estimated two-thirds of its $2.27 trillion in foreign exchange reserves in dollar-denominated assets, and Premier Wen Jiabao urged the United States in March to safeguard the value of China's holdings.

China's top banking regulator, Liu Mingkang, levelled unusually frank criticism at the US Federal Reserve on Nov 15, describing the US central bank's pledge to hold down borrowing costs and the weak dollar as a "new systemic risk".

Commerce Secretary Gary Locke said that the United States welcomed the rise in the yuan's exchange rate in recent years but wants the currency to climb further. He visited South China's Guangdong province late last month.

"We think more progress needs to be made in that area," Locke told a recent news conference in Guangzhou, the capital of the southern province, which accounts for nearly a third of China's exports.

China has in effect re-pegged the yuan to the dollar since mid-2008 to help its exporters, which were hit hard by a slump in orders as the global financial crisis intensified.

Beijing revalued the yuan by 2.1 percent against the dollar in July 2005 and, over the following three years, gradually let it climb by another 19 percent before calling a halt to its rise.

"We're pleased with the movement so far, but of course more needs to be done," Locke said.

The commerce chief participated last month in high-level trade talks in East China's Hangzhou, along with US Trade Representative Ron Kirk and Chinese Vice Premier Wang Qishan.

Locke said he expected the meetings to pave the way for "significant improvements and progress in the trade relationship between the two countries".

The yuan's exchange rate has dropped down on the US diplomatic agenda in the past year as Washington has looked to China for help in lifting the world economy out of recession.

The Obama administration said on Oct 15 that it continued to believe the yuan is undervalued, but added that China was not manipulating its currency.

But the Treasury Department, in a semi-annual report to the US Congress on currency practices of key trade partners, said China was piling up foreign exchange reserves at a rate that threatens progress in reducing global economic imbalances.