Bank of China

Foreign pressure 'speeding yuan reform'

PUBLISHED : Sunday, 24 April, 2005, 12:00am
UPDATED : Sunday, 24 April, 2005, 12:00am

The mainland's central bank chief admitted yesterday that foreign pressure would force Beijing to speed up the reform of its foreign exchange regime.

But People's Bank of China governor Zhou Xiaochuan dismissed concerns that altering the yuan's exchange rate mechanism would hurt mainland exporters.

Mr Zhou said a reform of the mainland's foreign exchange regime should take into consideration both domestic and international pressures.

He said that without international pressure, the mainland would have been able to pursue reforms more slowly, in accordance with Beijing's original plan.

'I always think that pressure is not a bad thing,' said Mr Zhou at the Boao Forum for Asia yesterday. 'And it often is a driving force that pushes us to do our work better.'

Beijing has succeeded in resisting pressure from the international community, particular from the United States, to raise the value of the yuan, which is pegged at about 8.28 to the US dollar. American manufacturers accuse Beijing of keeping the exchange rate artificially low in order to benefit mainland manufacturers.

Asked whether the mainland's manufacturing industry would be hurt if Beijing's reforms led to an appreciation of the currency, Mr Zhou said that reform would only speed up the restructuring of the sector.

He said manufacturers were more concerned about the competitiveness of their products than the exchange rate. Only manufacturers with inferior products would worry about a change in the exchange rate, and that would be a good thing for the restructuring of the mainland's manufacturing industry.

Mr Zhou hinted that an interest rate rise could be on the cards if inflationary pressures increased, without saying when such a move could take place.

The central bank governor also said the corruption plaguing the mainland's banking industry would only be solved by reforms. He said the recent series of scandals involving senior banking officials meant reforms so far had been inadequate and the process should be speeded up and reinforced.