US Treasury Secretary Henry Paulson's ongoing China visit has stirred much debate about a possible appreciation of the renminbi.
But instead of pushing hard for the revaluation of the Chinese currency, Paulson, the former Goldman Sachs chief executive officer and an expert on Chinese business issues, may focus more on the practicalities of financial reform and trade during his visit, experts said.
"Paulson has a solid understanding of China," said Zhu Jianfang, a senior macroeconomic analyst at China Securities Research Co Ltd. "He is more practical and should be able to find more common ground with the Chinese officials."
Having visited China around 70 times in the last seven years during his time at Goldman Sachs, Paulson took the position as Treasury Secretary in the George W. Bush administration at the end of May. He began his first official visit to China in this capacity yesterday.
Paulson's first stop was Hangzhou, capital of East China's Zhejiang Province, where he met with local officials and entrepreneurs. He will stay in China until Friday.
Paulson arrives in Beijing this morning and will meet Ma Kai, minister of the National Development and Reform Commission, followed by Vice-Premier Wu Yi later in the day. Paulson and Wu will hold a joint press briefing in the evening.
During his visit Paulson will also meet President Hu Jintao and other high-ranking Chinese officials in the areas of finance, commerce and the information industry.
Paulson met with China's central bank governor Zhou Xiaochuan at the annual meeting of the International Monetary Fund in Singapore earlier this week.
"Of course the renminbi issue will remain one of the major interests for US officials like Paulson and should be discussed with the Chinese side during the visit," said Wang Yuanhong, an economist at the State Information Centre.
But going on previous communication, neither side is in a hurry to reshuffle the renminbi exchange rate scheme. And it should be obvious to Paulson, given his understanding of China, that a drastic appreciation of the renminbi will bring little resolution to China's trade surplus with the United States, Wang said.
Before he left for China, Paulson said in Singapore on Monday that moving toward a freely traded currency is in China's interests. But, "I am not looking for immediate solutions or quick fixes ... I am looking to set a tone and an expectation of working through issues and making progress," he told reporters.
Zhou Xiaochuan also made it clear in Singapore that China is gradually moving toward a flexible exchange rate regime.
The renminbi, or yuan, reached its strongest level against the US dollar yesterday since China appreciated the currency by 2 percent in July 2005 and linked it to a basket of foreign currencies instead of to the US dollar alone. The central bank set the daily reference rate for the yuan at 7.9342 when traded against the dollar yesterday, compared to 8.11 upon last year's revaluation.
(China Daily September 20, 2006)