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Promise to improve forex management
Beijing—China will further
improve the management of the country’s massive foreign exchange
reserves and satisfy trade and investment needs of domestic firms and
individuals, China’s top foreign exchange regulator pledged.
“We’ll ensure the safety and liquidity, while improving the
profitability of the country’s foreign exchange reserves,” Hu Xiaolian,
administrator of the State Administration of Foreign Exchange (SAFE)
told China Daily on the sidelines of the 17th National Congress of the
Communist Party of China.
Hu promised to expand in an orderly manner the channels for capital
outflow, in which qualified domestic institutional investors (QDII) is a
part. “The quota for both QDII and qualified foreign institutional
investors (QFII) will continue to be increased,” she said.
During the Sino-US Strategic Economic Dialogue in May, China promised to
triple the QFII quota to US$30 billion, providing foreign players more
capital to buy domestic stocks which are currently off-limits to
foreigners except QFII. So far this year, the SAFE has granted more than
US$30 billion to domestic banks, insurance firms and investment funds
for overseas investment. But the actual outflow is far less than that
amount. Capital outflow is a way to improve the imbalance in China’s
international payment. In September, the country’s trade surplus jumped
56 percent from a year earlier to US$23.9 billion, putting the figure
for the first nine months of 2007 to US$185.65 billion, an increase of
69 percent year-on-year.
The huge influx of cash sent China’s foreign exchange reserves to
US$1.43 trillion by the end of September, further consolidating its
position as having the world’s largest foreign exchange reserves. Some
western countries claimed that was a result of an undervalued yuan and
have been piling up pressure for China to quicken the revaluation of the
yuan. However, Hu disagreed, saying that was caused by both global and
domestic situations. “Appreciation [of the renminbi] alone can not solve
the problem,” Hu said, citing President Hu Jintao as saying that
comprehensive measures will be adopted to maintain a basic equilibrium
in the balance of payments. She added China has made tremendous efforts
to address this issue and prefers to sort things out by getting to the
root cause.
She promised more openness from the Chinese side and pledged to hold
more talks with the international community on this issue. “Talks and
mutual understanding are needed to end conflicts,” she added.
Hu’s remark is in line with vice central bank governor Wu Xiaoling, who
is heading a Chinese delegation to the International Monetary Fund and
World Bank meetings in Washington amid rising pressure by the United
States and some European countries for China to quicken the revaluation
of the yuan.
“Moving the exchange rates in the absence of economic restructuring
policies will hurt China,” Wu told a forum at the Peterson Institute of
International Economics. “Since China is one of the driving forces of
the global economy, this will accordingly hurt the global economy,”
adding that these actions “show the responsibility of China as a large
emerging market.”
“We believe the exchange rate plays only a limited role in balancing the
international trade and reducing the trade surplus,” Wu said. Zhou
Xiaochuan, China’s central bank governor also expounded on the country’s
foreign exchange regime on Thursday during a press conference. The
market will play a bigger role in determining the exchange rate of the
yuan and full convertiblility of the yuan will eventually be realized,
Zhou said.
By the end of September, the yuan has risen 10.19 percent in value
against the US dollar since July 2005 when China scrapped the peg to the
greenback. In August, regulators allowed the yuan to go up or down 0.5
percent each day along a midpoint, up from the previous 0.3 percent,
paving the way for greater flexibility.
—The Daily Mail, China Daily news exchange item |
