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Factbox: Hints of divisions in China about yuan policy
http://www.reuters.com/article/idUSTRE6280QA20100309
Tue Mar 9, 2010 1:30am EST
With Chinese growth soaring and inflation fast creeping up, investors are beginning to wonder just when the government will allow the yuan to rise again.
A range of officials have spoken about the controversial currency policy during China's annual session of parliament. Management of the yuan is shrouded in secrecy, but the comments have exposed the outlines of different schools of thought in the government.
Here is a run-down of the three main camps and what the market makes of their divergence:
MINISTRY OF COMMERCE
Commerce Minister Chen Deming has been consistent since the yuan was fixed at about 6.83 to the dollar in mid-2008, insisting that this stability has been good for both China and the world.
The commerce ministry is focused on supporting exporters and foreign critics say that an artificially undervalued exchange rate is a major subsidy for made-in-China products.
Chen has used the parliament to press the case for keeping the yuan stable for a while longer and, tellingly, said that it might take another two to three years for exports to recover to pre-crisis levels.
"The direction of yuan reform will be gradual and controlled," he told Reuters.
PEOPLE'S BANK OF CHINA
Central bank governor Zhou Xiaochuan set the cat among the pigeons when he said at the weekend that "sooner or later" China would have to end its "special yuan policy."
Tasked with maintaining price stability, the central bank is naturally more hawkish about inflation than other government bodies. Signs of increasing price pressures may be why Zhou seems to be flagging yuan appreciation as a policy option.
In 2007, when prices were surging and the economy overheating, the central bank sped up the pace of appreciation.
But the central bank is also charged with supporting "quite fast" growth, and the fragile state of the global economy means it is wary of pushing too aggressively for a yuan rise.
"We must be extremely prudent about our choice of timing," he said.
STATE COUNCIL
The State Council, or cabinet, is seen by many as the final authority in charting China's yuan policy, though any decision to de-peg may be a matter for the Politburo Standing Committee, the nine member-body at the pinnacle of the Communist Party.
Premier Wen Jiabao, who heads the State Council and has a seat on the Standing Committee, made stability the watchword in his few words about the yuan in his keynote parliamentary speech.
"We will continue to improve the mechanism for setting the renminbi exchange rate, and keep it basically stable at an appropriate and balanced level," he said.
This was an exact repeat of his phrasing in his parliamentary address in 2009. Notable by its absence was the phrase used in 2008, when he spoke of "increasing the flexibility of the yuan exchange rate."
Nevertheless, China's top leaders could shift gears quickly if prices soar. Social discontent at rampant inflation was a factor behind the Communists' rise to power in the 1940s and also behind the Tiananmen pro-democracy protests in 1989.
To that end, it is significant that Wen said China was targeting average inflation this year of 3 percent, a goal that some economists reckon will be challenging given a bubbly economic environment in which price pressures are mounting.
THE MARKET'S VIEW
There is a broad expectation that China will resume yuan appreciation this year. The nature of how it will do that, though, is a source of much debate and ultimately guesswork. Insiders say that even central bank governor Zhou may not know what the State Council is planning to do.
Some analysts think Beijing will spring a one-off revaluation surprise on the market, pushing the currency up by 5-10 percent against the dollar. Others think it will, incrementally and haltingly, allow only faint appreciation.
The market is pricing in a roughly 2.8 percent rise in the yuan against the dollar over the next 12 months, according to offshore forwards.
Reporting by Simon Rabinovitch; Editing by Alan Wheatley; Editing by Tomasz Janowski |
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发表于 2010-3-10 00:44
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