A senior central bank official has called on other countries to be patient about the pace of reform of the foreign exchange regime, saying a rise in the yuan alone cannot narrow trade imbalances.
"China's export-oriented economy is a structural problem, which cannot be fixed merely by changing its exchange rate," Wu Xiaoling, deputy governor of the People's Bank of China, said yesterday.
Wu said the government is adopting a series of finance and tax measures to curb export growth and increase domestic consumption. It will also continue to relax controls on the capital account to allow more outflows to reduce excessive domestic liquidity.
Wu made the remarks at a Beijing forum to mark the 10th anniversary of the 1997 Asian financial crisis.
On Wednesday, US Treasury Secretary Henry Paulson said that China's pace of reform was too slow and the yuan was still undervalued.
"A country's financial sector should open in a way commensurate with its financial system," said Wu. "Opening without due management will threaten financial stability."
She said that the examples of Germany and Japan, which have experienced large rises in their currencies, serve to prove that exchange rates could not be used to trim a country's trade surplus.
"It is significant to look back on the 1997 Asian financial crisis, as we address an unbalanced global economy, excessive liquidity and fickle financial markets," said Wu.
China has taken precautions against financial crises, including setting up a prudent financial supervision system, developing its financial market and reforming the foreign exchange rate system, said Wu.
The Chinese currency closed weaker against the dollar yesterday, staging a mild correction after hitting post-revaluation highs in each of the previous six trading sessions. The yuan ended at 7.6188 to the dollar, down from Wednesday's close of 7.6180.
(China Daily June 22, 2007)