Bank official denies gov't manipulation of yuan
(Bloomberg)
Updated: 2006-01-20 09:07

People's Bank of China Assistant Governor Ma Delun said the market is determining the yuan's exchange rate, rejecting U.S. criticism that the government keeps the currency artificially weak to spur exports.

Ma said currency policy wasn't to blame for the U.S. trade deficit. ``Workers' pay in China is 1/33rd of that of a U.S. worker,'' Ma said in an interview in Shanghai on Jan. 18. ``The U.S. has to accept this global reallocation of industries.''

Senators Charles Schumer, a New York Democrat, and Lindsey Graham, a South Carolina Republican, are sponsoring legislation in Congress that would impose tariffs on imports from China unless the yuan is allowed to appreciate more rapidly.

The U.S. government estimates the trade deficit with China widened to $185 billion in the first 11 months of 2005, up 25.4 percent from a year earlier. Treasury Secretary John Snow said on Jan. 6 that he's ``not at all satisfied'' with China's currency policy.

The yuan's value has risen 0.5 percent against the dollar since a decade-old peg ended in July, compared with a 3.4 percent jump in Korea's won and 4.8 percent advance in Thailand's baht.

China's currency failed to jump this month when the central bank reduced its role by allowing 13 commercial banks including Citigroup Inc., HSBC Holdings Plc and ABN Amro Holding NV to act as market makers, who pledge to offer prices for the currency.

``We're not manipulating the yuan,'' Ma said. ``The U.S. trade deficit is not caused by the yuan. It's easy to explain this to an economist, but those who don't know about finance don't understand this. They should go back to university.''