System changes are unlikely soon as competitiveness of agriculture worries China
China is unlikely to reform its foreign exchange regime soon because of concerns about the competitiveness of domestic agriculture and the impact on its bad loan-laden banks, according to investment bank Credit Suisse First Boston (CSFB).
Pressure for yuan appreciation in the United States, which had heated up with the electoral cycle, would likely abate with an improved current account balance and employment statistics, said Jonathan Garner, CSFB's global co-ordinator for China research, yesterday.
'Our view remains that the US current account deficit is probably overstated in the official statistics, which under-reports US multinational profits,' said Mr Garner. 'We think probably as much as a third of the US current account deficit may actually be a statistical error.
'The dollar weakness that we already have will work with a lag to turn around the export side.'
Signs of that have already emerged, with US exports surging 15 per cent on an annualised basis in the third quarter, compared with 6 per cent growth in imports in the same period, he noted.