Economy

China closely watching developments in currency

(Xinhua)
Updated: 2010-09-16 14:18

BEIJING - China's Ministry of Commerce (MOC) said Wednesday that it was closely monitoring events that could affect its trade with North America.

The MOC spokesman Yao Jian said the ministry would watch US congressional hearings, scheduled for Wednesday and Thursday, on China's currency valuation, as well as BHP Billiton's bid for the world's largest potash fertilizer maker.

Speaking at a press conference in Beijing to release figures showing an increase in foreign direct investment (FDI) in China, MOC spokesman Yao Jian said any attempt to use its trade surplus with the United States to pressure China on its exchange rate would be unreasonable.

The central parity rate of renminbi or yuan, China's currency, strengthened to a record 6.725 to the US dollar Wednesday, according to the data released by the China Foreign Exchange Trading System.

The amount of FDI into China in August rose by 1.38 percent year-on-year to $7.602 billion, said Yao.

US enterprises had huge investments in the Chinese market with about $220 billion of sales each year and the US service sector had expanded rapidly in China for years, Yao said.

The US congress will launch hearings on Chinese exchange rates Wednesday and Thursday.

Potash Corp bid

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The MOC had noted reports on mining giant BHP Billiton's bid for the world's biggest fertilizer maker, Canada's Potash Corp, and would closely follow the process, Yao said.

China was a key potash fertilizer importer and imported about 55 percent of its potash fertilizer in 2008. That dropped to 28 percent last year, but China was still relatively dependent on the international market, Yao said.

The ministry had noted that the producer contributed about 20 percent of the world's potash fertilizer output and about 30 percent of the global sales, Yao said.

"Trade in potash fertilizer and resources companies will inevitably arouse global attention, including attention from Chinese sectors," Yao said.

Yao said the ministry had received no information about Chinese companies participating in the bid, but the Chinese government supported enterprises "going outside."

However, global investment in resources was highly complicated, he warned.

FDI inflow

The August figure brought China's FDI inflow in the first eight months to about $65.96 billion, up 18 percent from the same period last year, said Yao

In the first seven months, the country's FDI rose 20.65 percent to $58.35 billion. In July alone, the FDI increased 29.2 percent to $6.924 billion, according to the MOC.

Lu Zhengwei, an economist with Industrial Bank Co Ltd, said China's above-8-percent GDP growth was attractive to foreign investors despite the restructuring of its economy.

The government was revising the Directive Catalogue of Industries for Foreign Investment to improve the structure of foreign investment, the MOC announced earlier this month.

Industries encouraged by the government included new energy, new materials, bio-medicines, high-end manufacturing, and IT.

Transnational companies in China would be encouraged to set up research and development centers and extend their industry chains in the country.