Time not ripe for China to end dollar peg: adviser

BEIJING (BestGrowthStock) – The conditions are not ripe for China to unshackle the yuan from its 21-month-old peg to the dollar, a senior government economist said in comments published on Monday.

Zhao Jinping, the deputy head of foreign trade research with the Development Research Center (DRC), a think-tank under China’s cabinet, said Beijing was not comfortable enough right now to let the yuan rise because its export sector had not fully recovered.

“As for short-term policies like tax, interest rates and exchange rates, the conditions for them to change in the near term do not exist,” Zhao wrote in an opinion piece that was published on the China Economic Times, a newspaper run by the DRC.

But Zhao added: “If China’s exports and imports maintain rapid growth through the second and the third quarter, China can exit (from the anti-crisis policies) in an appropriate manner.”

Strong signals of a thaw in relations between Washington and Beijing have fanned expectations that China may resume appreciation of its currency soon, or even conduct another one-off revaluation.

Benchmark dollar/yuan one-year non-deliverable forwards were bid at 6.6270 at midday, implying 12-month yuan appreciation of 3 percent.

Zhong Shan, a vice commerce minister, was quoted over the weekend by Information Times, a Guangdong-based newspaper, as saying that China and the United States had reached an initial agreement to keep the yuan exchange rate “basically stable.”

The ministry denied the report on Monday, saying through the official Xinhua news agency that Zhong had not made such comments and that China would keep “basic stability” in its trade policies, including the yuan.

President Hu Jintao said last week that China has been implementing a managed floating exchange rate system.

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(Reporting by Zhou Xin and Alan Wheatley; Editing by Ken Wills)

Time not ripe for China to end dollar peg: adviser