US calls for financial sector modernization
(chinadaily.com.cn)
Updated: 2005-10-18 11:03

"Moving toward a truly flexible exchange rate regime requires quite a large number of steps," Snow said on Monday at a press conference in Beijing. "We recognize that will take some time."

Snow all but ruled out the possibility that he would accuse China of currency manipulation when he reports to Congress in early November, said The New York Times.

Chinese Premier Wen Jiabao said Saturday that the yuan would remain "stable at a reasonable and balanced level," according to Xinhua, the official Chinese news agency.

On July 21, Beijing announced to the world that it would abandon its fixed peg to the dollar and move toward a "managed float" in reference to a basket of currencies, mainly euro and yen.

Bush administration officials contend that the feuding over China's currency, though a focal point of hostility among U.S. lawmakers, is merely one piece of the expanding economic relationship between the two nations.

American banks, investment banks and insurance companies are clamoring to gain more access to the Chinese markets. The Chicago Mercantile Exchange was the host of a conference in Beijing a few weeks ago, promoting American tools for trading futures and options contracts used to hedge against volatility in stocks, currencies and commodities.

On Tuesday, the Securities Industry Association will sponsor an even bigger two-day conference that will feature the biggest investment banks and law firms on Wall Street. Mr. Snow, who will give the keynote address at the securities conference, has been pitching Wall Street's wizardry for two days, accompanied by the chairmen of the Securities and Exchange Commission and the Commodity Futures Trading Commission.

Chinese officials have made it clear they are receptive to the calls for "financial modernization" and analysts say that most of the American proposals are already at some stage of development.

But Snow is walking down a delicate political path, the New York Times reported. Shortly before he left Washington for China, Republican and Democratic senators pointedly prodded him to convey their displeasure and impatience about the slow pace of change on China's currency.

Senator Charles Schumer, Democrat of New York, has threatened to resurrect a bill he co-sponsored with Senator Lindsey O. Graham, Republican of South Carolina, that would impose tariffs of 27.5 percent on Chinese imports if Beijing failed to allow its currency to move in line with market forces. Last spring, the two senators shocked the Bush administration by getting 67 senators to vote against a motion to kill the bill.

Snow and Alan Greenspan, chairman of the Federal Reserve Board, are both opposed to such legislation, arguing that it would cripple trade with China and merely shift part of the trade deficit of the United States from China to other countries in Asia and Latin America.

"It is ill-conceived legislation," Mr. Snow said on Monday. But he added: "It does have some support, I will acknowledge that."