Fast yuan gains could hurt economy
(Reuters)
Updated: 2006-02-28 15:30

China needs to keep its currency stable because an overly rapid appreciation could hurt its economy, a senior central banker was cited by the official China Securities Journal as saying on Tuesday.
 
"If the yuan rises too rapidly, a lot of overseas investors might move their factories or companies out of China," Tang Xu, director-general of the research bureau of the People's Bank of China, was quoted as saying.

"That would increase unemployment and hurt our economy, and commercial banks could also face a difficult operating environment," Tang said.

If interest rates were too low, they could encourage too much fixed investment, Tang added.

Tang reiterated the central bank's pledge to continue making the yuan exchange rate more market-oriented.

China revalued the yuan by 2.1 percent to 8.11 against the dollar in July. As of Monday, when the yuan chalked up a fresh post-revaluation close of 8.0407 to the dollar, it had strengthened a further 0.86 percent.