People's Bank of China Governor Zhou Xiaochuan said early
this week that, as he observed, the upward pressure on the renminbi exchange
rate with the US dollar has been tapering off in the last few weeks.
If true, that would be cause for optimism for China since a stable currency
rate will lay the necessary the groundwork for it to carry out its
market-oriented reforms, especially that for its still largely State-owned
banking industry.
Zhou, governor of the Chinese central bank, attributed the favourable turn to
China's improved trade balance and the global economic situation.
Massive purchases by three Chinese trade commissions to the United States
since last November not only reduced the later's trade deficit but also
demonstrated China's sincerity to pursue trade balance. Despite the continuing
complaint from the US side, those purchases are the best that China can do other
than plunging into the uncharted waters of free currency conversion before its
own banking system is ready.
Meanwhile, recovery of the US economy in the last quarter of 2003 heralds a
brighter prospect for the world economy in 2004.
In retrospect, China charted a difficult course in 2003 between the risk of a
slowdown of export growth and the danger of an explosion of disputes with its
trade partners.
However, if the expected 8.5 per cent gross domestic product growth in 2003
was testimony to the country's success in surviving the outbreak of SARS (severe
acute respiratory syndrome).
Thanks to its insistence on the yuan's valuation against the US dollar, the
country's foreign trade volume soared by 37.1 per cent to US$851.2 billion in
2003, making it the fourth largest trader in the world.
Contrary to some Western politicians"criticism that China is grabbing jobs
from their countries, a robust Chinese economy is a great support to the world
business as its appetite for imports has passed from forecast to fact. Its 2003
imports increased by almost 40 per cent over the previous year.
However, as the world business is beginning to show signs of recovery now,
there is no point to believe the trend to be able to sustain itself, and that
the world could sail into a boom cycle without China's contribution, in trade
and in investment.
On China's part, whether or not the world is in recovery, and whether or not
there is criticism of its renminbi policy from the Western countries, it must
pursue its banking and financial reform, and its own timetable of foreign
exchange liberalization.
And most likely, both the international pressure for renminbi revaluation and
the domestic pressure for higher quality in banking services will conspire to
drive the reform to proceed more quickly than ever.
The Chinese authorities are fully aware of the necessity to ultimately float
the nation's currency if the country is to fully integrate its market into the
world economy.
The central bank governor's comments should not be deemed merely as a sign of
relief or complacency.
(China Daily)
