China will stick to its current exchange rate policy and aim to maintain market stability, Yi Gang, a central bank vice governor, said on Saturday. "Our exchange rate policy is very clear," Yi told Reuters on the sidelines of an International Monetary Fund meeting in Turkey. Asked whether China had been facing more pressure from other countries to let the yuan appreciate, he said.
"We will continue our policy setting." China has repeatedly declared it is in the process of reforming its exchange rate system to allow the yuan to move more flexibly, but that it will not allow moves that could destabilise its economy. In practice, China's central bank has kept the yuan almost flat against the US dollar since July 2008, when the global financial crisis began worsening.
During the depths of the crisis, that policy drew relatively little international criticism, as China appeared to be providing badly needed stability to global markets. But now that the world economy is recovering, China is starting to receive more public pressure to let its currency appreciate, as a way of cutting its huge trade surplus and correcting global imbalances.
Canadian Finance Minister Jim Flaherty said on Thursday that Canada wanted China to speed up the process of relaxing restrictions on the yuan. IMF chief Dominique Strauss-Kahn repeated on Friday that his organisation believed the yuan was undervalued. Yi, however, hewed close to China's official line since 2005, when it abolished a formal yuan peg to the dollar.
"We have an exchange rate setting of a managed float with reference to a basket of currencies and based on a market mechanism," Yi said. "We will continue this mechanism while at the same time maintaining the stability of the market." The Group of Seven rich nations was expected to issue a statement about exchange rates on Saturday, though it was not clear how China would be mentioned, a G7 source said.
The G7's statement in April said, "We welcome China's continued commitment to move to a more flexible exchange rate, which should lead to continued appreciation of the Renminbi in effective terms and help promote more balanced growth in China and in the world economy."
Yi also reiterated on Saturday that China had no plans for monetary policy tightening anytime soon. "We will maintain the stability and continuity of monetary policy," he said. China's annual economic growth reached 7.9 percent in the second quarter of this year and the latest data has showed strong momentum, but officials have consistently said the foundation of the recovery is not yet solid.
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