China will keep its currency stable despite pressure from a sliding
Japanese yen,
central
bank chief
Dai Xianglong said Tuesday in Beijing.
"The Renminbi's value is underpinned by China's sufficient foreign
exchange reserves and favorable trade surplus," Dai, governor of
the People's Bank of China, told a press conference.
But he urged the Japanese Government to take measures to stabilize
the yen, whose rapid slump in value is putting pressure on
currencies of its Asia neighbors, including the Renminbi.
Dai said Japan's economic fundamentals are able to keep its
currency strong. The yen can be supported by the country's
"powerful economic strength" and its hefty foreign exchange
reserves which are the world's largest and still growing.
The yen depreciated by about 15 per cent between September and
December. It hit a 39-month trough of 133.37 against the US dollar
last Wednesday.
Advocates for the weak yen cited Japan's lackluster economic
growth, an argument that failed to convince Dai.
Japan's economy is weak, but so is the US economy and in fact the
global economy has been in a downturn, he noted.
The yen's slide and the Japanese Government's nonchalance towards
the issue has raised concern among Asian countries, which fear a
slumping yen could lead to falls in the value of their own
currencies.
"We hope the Japanese Government will heed views of Asian countries
and maintain stability of the yen,'' he said.
"We would not like to see the scenario that the Japanese yen's
depreciation lead to an all around slide in Asian currencies.''
The yuan closed at 8.2768 to the dollar Tuesday, firmly near the
strong end of its thin trading band of 8.2760 to 8.2800 that the
central bank would like to see.
The yen was trading at around 131.6 per dollar Tuesday.
Dai said China would make progress towards full convertibility of
the Renminbi but did not give details.
"The exchange rate formation mechanism will be improved while a
stable exchange rate is maintained,'' he said.
Renminbi is now convertible only on the current account, which
mainly covers trade, but not convertible on the capital account,
which covers capital flows.
"Better management of the current account will be accompanied by
progress in capital account convertibility,'' he said.
China's foreign exchange reserves rose US$46.6 billion to US$212.2
billion by the end of last year, making them the second largest in
the world behind Japan.
Dai said the central bank will allow domestic joint-stock banks to
let foreign banking houses own as much as 25 per cent of their
shares to enable the Chinese institutions introduce advanced
banking management technology.
He
also said the central bank will push for a fundamental shake-up of
the country's wholly State-owned banks to prepare them for the
challenges brought about by the country's entry to the World Trade
Organization.
State banks will be replenished with capital, their corporate
governance will be strengthened and the financial sector will work
hard to solve their problem of non-performing loans, he said.
(China
Daily January 16, 2002)