China Reaffirms Review of Yuan

Chinese central bank Gov. Zhou Xiaochuan reiterated Sunday that the country was reviewing its currency exchange rate system but said it was too early to discuss when China might widen the range in which the yuan trades against the dollar.

“I can’t say the specific policy arrangements for that,” Zhou told reporters when asked whether a widening of the trading band might happen next year. He was attending a meeting here of finance ministers and central bankers from the Group of 20 nations.

The United States, Japan and other countries have increasingly called on China to drop the yuan’s decade-old peg to the dollar, arguing that the fixed exchange rate of 8.3 yuan to the dollar undervalues the currency and gives the country an unfair trading advantage by keeping prices of its exports low.

Chinese authorities “were at some pains to say that they are taking this seriously,” Canadian Finance Minister Ralph Goodale said. “They have typically ended conversations on this by saying, ‘It may happen faster than you think.’ ”

On Saturday, Chinese President Hu Jintao said China would push to loosen the yuan’s peg to the dollar after reforms ensured that the economy would be strong enough to withstand any disruption caused by a revaluation of the currency.

During a meeting with President Bush at a summit of Asia-Pacific region leaders in Chile, Hu thanked Bush for rejecting calls by some U.S. Democratic lawmakers to seek World Trade Organization sanctions against China for its currency policy, said He Yafei, a Foreign Ministry spokesman.

Bush did not mention the yuan after his meeting with Hu. On Sunday, Bush repeated that the United States favored a strong dollar.

“At a meeting today, people expressed concern about the value of the U.S. dollar, and I reiterated that my government has a strong-dollar policy,” the president said at a news conference. He also pledged to reduce the U.S. budget deficit as a way to bolster the currency.

But many investment pros said the words rang hollow given the dollar’s continuing slide.

Bush’s comments “don’t amount to anything more than political posturing,” said Monica Fan, head of currency strategy at RBC Capital Markets in London.