Global General

Currency is off limits at G20 summit

By Wang Xiaotian (China Daily)
Updated: 2010-06-19 08:36
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BEIJING - Discussions about the yuan-dollar exchange rate will not be on the agenda at the Group of 20 meeting in Canada next week, Chinese officials said on Friday.

Zhang Tao, director of the international department of the People's Bank of China, the nation's central bank, said at a press conference that Chinese leaders will not engage in talks about its currency with other world leaders at the summit.

"China is monitoring the domestic and international economic situations very closely in deciding its own policies, including those regarding the yuan exchange rate mechanism," he said.

The Chinese economy still faces multiple uncertainties, Zhang told reporters.

At the same time, Vice-finance Minister Zhu Guangyao urged countries attending next week's G20 summit in Toronto to take account of each other's concerns.

Beijing is under pressure from Washington to raise the yuan rate to help the United States reduce its large trade deficit with China, and Zhu's comments followed a new bout of China-bashing at a US House of Representatives hearing on Wednesday.

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Commenting on Friday's official remarks, the Wall Street Journal website reported that "China appears increasingly unlikely" to move on its currency before the G20 summit - "a prospect that threatens to restart a poisonous cycle of increasing criticism from US lawmakers and increasing defensiveness from Beijing".

One of the factors that Chinese economists have frequently cited of late is that, in May, the growth in China's industrial output was 16.5 percent year-on-year, 1.3 percentage points lower than in April.

The World Bank also announced on Friday that it has revised its forecast of China's yearly GDP growth in 2011 from the previous 8.7 percent to 8.5 percent. It said that after a strong start in 2010, China's growth will inevitably begin to slow down as a result of its policy-level stimulus and of measures to cap property market prices, which were introduced in April.

The World Bank predicted China's yearly GDP growth could be 9.5 percent in 2010, before it falls to 8.5 percent and continues to be slow in the next decade (while still keeping a respectable rate), due mainly to decelerating contributions from labor and productivity, and relatively weak capital accumulation.

Louis Kuijs, a senior economist at the World Bank, told China Daily that there is room to move on the yuan exchange rate, preferably on the flexibility side.

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