Monday, November 22, 2004

G20 statements and renminbi peg

They seem to be preparing the way for a gradual removal of the peg. As reported by one of our correspondents in finance:

G20 on exchnge rate:
* "We understand the importance of medium-term fiscal consolidation in the United States, continued structural reforms to boost growth in Europe and Japan, and, in emerging Asia, steps towards greater exhcnage rate flexibility, supported by continued financial sector reform, as approprate."
* "Experience has shown that countries seeking domestic monetary autonomy while substantially liberalizing their capital account should increase the degree of exchange rate flexibility accordingly."
Next G20 meeting is in Beijing

China's comments:
Mr. Zhou, the PBoC governor:
* On possibility of exchange-rate changes: "You can read October 2003 Chinese government documents that already clearly mentioned we are going to reform our exchange-rate regime and to try to set our exchange-rate at an equilibrium point and also we are going to gradually reach capital-account convertibility. This is the general direction.'' "Recently, I think, at the end of September and the beginning of October, our premier Wen Jiabao mentioned the policy orientation of that related to the exchange rate. And this is basically all the new progress so far.'' "We are reviewing all our foreign-exchange control systems." (comment: Mr. Wen's view here alluded to is that China had a more flexible currency regime before the breakout of Asian financial crisis and would consiser to have more flexibilty now that the crisis was over).

President Hu's comment after meeting President Bush at APEC meeting:
* China will "push for reform of the exchange rate while maintaining stability in the economy,'' Hu "expressed appreciation for Bush's rejections of applications of some people within the U.S.'' on the yuan exchange rate.''

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