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China To Decide Its Exchange-Rate Policy On Its Own Says President Hu Jintao (C)

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Bloomberg reports that in what could be a setback to the Obama administration’s efforts to push China to revalue its currency, China’s President Hu Jintao has said that his country won’t yield to any external pressure in deciding when to adjust the yuan. President Obama had urged China to move towards more market oriented exchange-rate policy. China’s official news agency, Xinhua, cited President Jintao as saying in a meeting with President Obama on Monday that, "any currency revaluation by China must be based on its own economic and social-development needs.”

In a reaction to the comments made by the Chinese President, yuan forwards fell the most in three weeks as the remarks prompted speculation that the currency won’t resume gains in the short-term. In the same meeting, President Obama also showed his concern over some market access barriers in China. U.S lawmakers have been urging the Obama administration to exert pressure on China to change its currency policy. They say that yuan, which is pegged at 6.83 to the U.S dollar since July 2008, gives China’s exporters an unfair advantage. According to data compiled by Bloomberg, twelve-month non-deliverable forwards declined 0.2 percent to 6.6375 per dollar as of 3:49 p.m. in Hong Kong, the biggest loss since March 22.

Liu Dongliang, a Shenzhen based foreign exchange analyst at China Merchants Bank Co, the country’s fifth largest lender by market value, said to Bloomberg, “The comments may ease speculation the yuan will rise in the short term and prompt traders to buy dollars in the NDF market.” According to a Bloomberg survey of analysts, China may allow the yuan to appreciate by June 30 in order to curb inflation. But it will avoid a one-time jump in value that might curb its exports.

Huang Yiping, a professor at the China Center for Economic Research at Peaking University, says that President Hu’s comments suggest that yuan will be revalued in the coming months. He also believes that this comment comes largely due to the fact that the report by Treasury secretary Timothy Geithner, which was originally due on April 15, branding China as a “currency manipulator” cannot be indefinitely delayed. “The exact time I don’t know, but I think it won’t take a very long time given that there are so many things coming up,” said Huang, a former chief Asia economist for Citigroup Inc. (NYSE: C).

 

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Posted-In: Barack Obama Hu Jintao Timothy GeithnerPolitics Global Economics General