BEIJING (Reuters) - China told the rest of the world on Friday not to meddle with the way it manages the yuan, calling the exchange rate a sovereign matter for it alone to decide.
Beijing is under pressure from Washington in particular to let the yuan rise in value to help reduce the large U.S. trade deficit with China, and markets are expecting the issue to come up at next week’s Group of 20 summit in Canada.
But senior officials brushed aside that idea.
“The RMB is China’s currency, so I don’t think it is an issue that should be discussed internationally,” Cui Tiankai, a vice foreign minister who is China’s G20 sherpa, the official in charge of preparing for the summit, told a news briefing.
China has kept the yuan, also known as the renminbi (RMB), steady around 6.83 per dollar for almost two years to help its exporters ride out the global financial crisis. Many Western economists believe it is undervalued by as much as 40 percent.
Zhang Tao, head of the central bank’s international department, said that as far as he knew the yuan had never been discussed at previous G20 summits.
“The Chinese government will decide on its foreign exchange rate policy according to both domestic and global economic situations,” Zhang said.
While the global economic recovery was unfolding more strongly than expected, the world economy was facing multiple uncertainties, Zhang said.
Foremost among these was the euro zone’s debt morass, Vice Finance Minister Zhu Guangyao added.
“The global economy is in the process of recovering, but still faces uncertainties, especially the European debt crisis,” he said.
The European Union is China’s biggest trading partner, and although China’s overall exports have recovered to pre-crisis levels Beijing remains concerned that the world economy is not yet on a stable footing.
How swiftly countries should unwind the super-loose fiscal and monetary policies they introduced to counter the global crisis will be high on the agenda at the G20 summit in Toronto on June 26 and 27.
Debt-averse Germany is pressing for a rapid reduction in budget deficits, while the United States and France fear deep cuts could derail the economic recovery.
Straddling the two camps, Zhu said countries with serious budget deficits should accelerate fiscal consolidation but in a manner that is “growth-friendly”.
On the question of how global financial regulation should be reformed, Zhu said a key principle was that countries should chart their own paths based on their own economic conditions.
But, as general goals, he said the Group of 20 wealthy and emerging nations should work to strengthen banks’ capital and liquidity requirements.
Editing by Alan Wheatley