China told the world on Saturday it will not rush to reform its exchange rate.  

Senior officials attending the World Economic Forum in Davos, Switzerland said currency reform steps would come eventually but the world would have to wait for China to take them at a gradual pace.

 

For over a year now, top industrial nations have been urging China to let its yuan currency strengthen to help balance global growth and resolve a massive US current account deficit.

 

"The world economic imbalance is attributable to many reasons, but not the exchange rate," Li Ruogu, deputy governor of the People's Bank of China, told the World Economic Forum Saturday. "China has not the capacity to address that so-called imbalance… We are not able to do it."

 

A more flexible exchange rate for China, along with dollar weakness triggered by US trade and fiscal deficits, will be hot topics at a G7 meeting starting in London on Friday. China's central bank officials and Finance Minister Jin Renqing will attend.

 

Vice Premier Huang Ju told the Davos gathering Saturday that before acting on exchange rates, China needs to make further progress on cleaning up its ailing banking system and opening up its capital markets.

 

"We do not have a specific time frame," Huang said. "To improve the exchange rate mechanism, we have to maintain the exchange rate at a reasonably stable level."

 

He added any adjustment to the currency peg would come in a "gradual, steadfast" manner.

 

Li Ruogu said there is no need for a forex move soon. He said there were no signs that China's economy, which grew by over 9 percent last year, was seriously overheating, and went as far as ruling out another increase in official lending rates for the time being.

 

He said any rate rise now would make it more difficult to create enough jobs for the millions of migrant workers and poor farmers moving to China's cities every year.

 

"So far data do not give us strong reasons for further interest rate increases at this point," said Li. The central bank had increased official lending rates modestly last October, the first such move in nearly a decade.

 

"There's a tremendous task to make people have jobs, thus a certain growth rate is extremely important. Our goal is to keep the economy growing at roughly 8 percent," Li added.

 

(China Daily January 30, 2005)