By Bloomberg News Nov. 16 (Bloomberg) — China’s Ministry of Commerce said international pressure for appreciation in the yuan was “not fair,” as U.S. President Barack Obama started a four-day visit calling for a more balanced relationship between the two nations. Seeking a stronger Chinese currency as the dollar weakens “is not conducive to a global economic recovery and is not fair,” ministry spokesman Yao Jian said at a press briefing in Beijing today. “It’s necessary for us to provide a stable and predictable environment in terms of macro-economic and exchange rate policies.” Yuan forwards declined for the first time in four days as the comments eased speculation that China was preparing to allow appreciation after a central bank report last week dropped a pledge to keep the currency “stable.” The government has held the exchange rate at 6.83 per dollar since July last year, after allowing a 21 percent gain in the previous three years, seeking to shield exporters from slumping demand. “The comments from the commerce ministry eased people’s speculation about a resumption in appreciation this year,” said Liu Dongliang , a Shenzhen-based foreign-exchange analyst at China Merchants Bank Co., the country’s sixth-largest lender. “China won’t yield to foreign pressure.” Twelve-month non-deliverable yuan forwards weakened 0.2 percent to 6.6025 per dollar as of 1:47 p.m. in Shanghai, from 6.5875 at the end of last week. The contracts, which earlier touched 6.5835 to match the highest level since Oct. 21, signal traders are predicting a 3.4 percent advance in a year. The central bank set the daily reference rate little changed at 6.8272. Trade Imbalance Officials in Europe and the U.S. have urged China to allow greater flexibility in the yuan, claiming the undervalued currency gives the Asian nation an unfair trade advantage. Leaders from the Asia-Pacific Economic Cooperation group, who met in Singapore over the weekend, declined to back U.S. calls for a stronger yuan. China’s trade surplus in the first 10 months of this year was $159 billion, customs bureau data showed. The U.S. trade deficit with China rose to $22 billion in September from $20 billion in August, according to the U.S. Commerce Department. “This trade could create even more jobs on both sides of the Pacific,” Obama said today in his opening remarks to a group of university students at the Shanghai Science and Technology Museum. “As demand becomes more balanced it could lead to even broader prosperity.” Dollar Decline The Dollar Index, which tracks the greenback against six currencies including the euro and yen, fell 0.4 percent to 75.025 and has dropped 8 percent this year. A weaker dollar is helping the U.S. to be more competitive, Yao said. In China, exporters are only cautiously optimistic and haven’t seen a notable recovery, Yao said. Chinese exports dropped 13.8 percent in October, a 12th month of decline, the customs bureau reported Nov. 11. The appreciation of the yuan is part of the “package of necessary reforms” for China’s economy, said managing director of the International Monetary Fund Strauss-Kahn in a speech in Beijing today. Near-term “concerns about the dollar can be eased with appropriate policy actions from the U.S. authorities,” he said. Encouraging Speculation Financial officials in China and Japan warned the Federal Reserve’s interest-rate policy risks spurring speculative capital that may inflate asset prices and derail the global economic recovery. Emerging economies “might overheat and experience financial turmoil,” Bank of Japan Governor Masaaki Shirakawa said in Tokyo today. Low rates and the dollar’s depreciation present “new, real and insurmountable risks to the recovery of the global economy,” Liu Mingkang , China’s top banking regulator, said yesterday. The comments reflect concern that the Fed’s pledge to keep rates near zero for an “extended period” may lead to a repeat of the financial crisis. MSCI’s emerging-markets stock index has risen 71 percent this year and Asian countries from Singapore to South Korea are trying to rein in surging real-estate prices. “The continuous depreciation in the dollar, and the U.S. government’s indication that, in order to resume growth and maintain public confidence, it basically won’t raise interest rates for the coming 12 to 18 months, has led to massive dollar arbitrage speculation,” Liu, chairman of the China Banking Regulatory Commission, said in Beijing yesterday. While lower interest rates will help Americans pare debt, “there are also risks involved,,” Shirakawa said today at a Paris Europlace Financial Forum in Tokyo. Having borrowing costs near zero may strain government finances if it spurs speculation that the dollar will continue to slide, he said. “Key international reserve-currency issuing countries haven’t taken responsible fiscal and monetary policies,” Zhu Guangyao , China’s assistant finance minister, said in Beijing today, adding those nations didn’t consider the external effect of their domestic policies. — Li Yanping , Belinda Cao , Judy Chen, Dingmin Zhang. Editors: Paul Panckhurst , John McCluskey . To contact Bloomberg News staff for this story: Li Yanping in Beijing at +86-10-6649-7568 or yli16@bloomberg.net Belinda Cao in Beijing at +86-10-6649-7570 or lcao4@bloomberg.net
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China Trade Ministry Says Calls for Yuan Gains `Not Fair’ as Dollar Drops
