China will pursue exchange rate reform: deputy central bank head

MADRID (AFP) - China will pursue exchange rate reform, the deputy head of the Chinese central bank pledged here Friday in the face of mounting pressure in the West for Beijing to ease restrictions on its currency.
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"We will continue to promote exchange rate reforms," Liu Shiyu told the closing session of a Spanish-Chinese financial forum.

The United States and other key trading powers have repeatedly complained that the Chinese currency, the yuan, has been artificially undervalued by Beijing's relatively inflexibile exchange rate policies, giving Chinese exports an unfair advantage.

Group of Seven finance chiefs meeting in Washington last week hailed China's stated willingness to allow the yuan to float more freely but said that "in view of its rising current account surplus and domestic inflation we stress its need to allow an accelerated appreciation of its effective exchange rate."

US Treasury Secretary Henry Paulson on Tuesday reiterated the G7 appeal, arguing that "prospects for achieving sustained, balanced growth in China and in the world economy (would be) much greater, if the Chinese increase the pace of appreciation in the short term and implement a fully market-determined currency in the medium-term."

The following day the yuan broke through the key 7.5-to-the-dollar level for the first time in Wednesday trade but there was little expectation the rise would allay concerns in the United States.

"Psychologically this has a rather large impact, but technically the impact isn't huge," said Cai Sijuan, a forex dealer with Guangzhou Commercial Bank.

Speaking in Madrid Friday, Liu Shiyu also insisted that "China doesn't deliberately look for a trade surplus."

China routinely records large trade surpluses with the United States, which are seen in some of its trading partners as contributing to imblances in the global economy, notably in light of Washington's huge trade deficit.