正文
Former central bank governor says rapid accumulation of foreign reserves complicates government's possible plan to widen trading band.
September 13 2006: 6:39 AM EDT
XIANGHE, China (Reuters) -- China should not rush into widening the yuan's trading band against the dollar as this would create problems for the economy, a former central bank governor and mayor of Tianjin municipality said Wednesday.
Speaking at a financial forum, Dai Xianglong said that rapid accumulation of foreign exchange reserves was making it more difficult for the central bank to manage monetary policy.
But growth of China's foreign exchange reserves, which hit $954.5 billion at the end of July, would not slow any time soon, he said.
"The fact that China has abundant forex reserves does not mean it can widen the trading band too quickly. That will create problems," he said.
Although consensus has been building that the yuan should be stronger, government economists have also warned that any rapid spike could create chaos.
Dai said the pace at which China widened the band should be in lockstep with reforms aimed at making the currency convertible under the capital account, a long-term goal.
State-run newspapers have run reports in recent weeks saying that China may widen the yuan's trading band to allow greater flexibility in the currency but no timeframe has been given.
Yen boosted
Earlier Wednesday, market talk that China might announce a widening of the yuan's tight trading band supported the yen which is seen as one of the proxies for the yuan.
Dai also reiterated comments published in state media earlier this week that the yuan would become convertible on the capital account within a certain geographical area and up to certain amounts in a trade and financial zone under development in Tianjin, a northern port city.
The foreign exchange regulator had given Tianjin's Binhai New Area approval to conduct currency reforms in seven aspects, he said without elaborating.
The State Council, or cabinet, gave the green light for Binhai to carry out a host of financial reforms in late May, naming it as an "experimental zone for comprehensive reform," a status shared only by Shanghai's Pudong New Area.
The cabinet said then it would allow Binhai to experiment with innovations in foreign exchange, universal banking, offshore financing and investment funds as well as land administration.
Binhai officials say they have already ted their proposals for financial and land policies to the State Council and hope to win approval for them next month.
Dai has said that Chinese residents and companies would be gradually permitted to buy foreign currencies freely and qualified institutions allowed to expand foreign investment activities.
September 13 2006: 6:39 AM EDT
XIANGHE, China (Reuters) -- China should not rush into widening the yuan's trading band against the dollar as this would create problems for the economy, a former central bank governor and mayor of Tianjin municipality said Wednesday.
Speaking at a financial forum, Dai Xianglong said that rapid accumulation of foreign exchange reserves was making it more difficult for the central bank to manage monetary policy.
But growth of China's foreign exchange reserves, which hit $954.5 billion at the end of July, would not slow any time soon, he said.
"The fact that China has abundant forex reserves does not mean it can widen the trading band too quickly. That will create problems," he said.
Although consensus has been building that the yuan should be stronger, government economists have also warned that any rapid spike could create chaos.
Dai said the pace at which China widened the band should be in lockstep with reforms aimed at making the currency convertible under the capital account, a long-term goal.
State-run newspapers have run reports in recent weeks saying that China may widen the yuan's trading band to allow greater flexibility in the currency but no timeframe has been given.
Yen boosted
Earlier Wednesday, market talk that China might announce a widening of the yuan's tight trading band supported the yen which is seen as one of the proxies for the yuan.
Dai also reiterated comments published in state media earlier this week that the yuan would become convertible on the capital account within a certain geographical area and up to certain amounts in a trade and financial zone under development in Tianjin, a northern port city.
The foreign exchange regulator had given Tianjin's Binhai New Area approval to conduct currency reforms in seven aspects, he said without elaborating.
The State Council, or cabinet, gave the green light for Binhai to carry out a host of financial reforms in late May, naming it as an "experimental zone for comprehensive reform," a status shared only by Shanghai's Pudong New Area.
The cabinet said then it would allow Binhai to experiment with innovations in foreign exchange, universal banking, offshore financing and investment funds as well as land administration.
Binhai officials say they have already ted their proposals for financial and land policies to the State Council and hope to win approval for them next month.
Dai has said that Chinese residents and companies would be gradually permitted to buy foreign currencies freely and qualified institutions allowed to expand foreign investment activities.
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