China forex regulator says intl payments imbalance pressuring exchange rate |
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Sun, 21 Jan 2007 15:11
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BEIJING (AFX) - China's international payments imbalance is complicating economic policy and putting pressure on the exchange rate, the State Administration of Foreign Exchange (SAFE) said.The forex regulator said balancing international payments is the key to economic development this year and that it will stick to the central government's policies aimed at achieving that goal.'Promoting a basic balance of international payments has become a key to balancing domestic development and opening up and realizing fast and good economic development,' SAFE said in a statement on its website after an annual work meeting.It said 'the large surplus in the balance of payments is continuing, and this has increased the complexity and difficulty of macroeconomic controls, increased trade friction and pressure for revaluation of the (yuan)'.The trade surplus 'is not conducive to changing the mode of economic growth and accelerating the restructuring process', the regulator said, referring to Beijing's plans to reorient growth towards domestic consumption.SAFE said the Communist Party and the State Council 'attach great importance' to the international balance of payments and that they note that 'promoting a balance in international payments is an important task in maintaining economic stability'.Fu Ziying, Assistant Minister of Commerce, told an audience here earlier during the weekend that the government will use export tax rebates and the tariff regime to promote balanced terms of trade.He also said that the government will use 'foreign exchange' to achieve this goal, without providing further details.China's trade surplus grew 74 pct in 2006 to 177.47 bln usd, sailing past even the most aggressive government forecasts.The SAFE statement also cited director Hu Xiaolian as saying that the regulator will further deepen foreign exchange management reform, with this year's focus on continuing to lift limits on the amount of hard currency that companies and individuals are allowed to hold.The regulator also reiterated that it would further improve yuan exchange rate formation mechanism, improve forex reserves management and effectively prevent risks.It said it will encourage capital outflows and futher widen outbound investment channels.'This year's focus is to gradually ease limits on the size and products of institutions and individuals' overseas financial investment and to try to make breakthroughs in expanding outbound financial investment,' the statement said.It also said that it will enhance supervision over short-term cross-border capital flows, especially speculative funds. SAFE will also strictly control any excessively fast growth in foreign debt levels and enhance control over trade credit and other fund inflows, the statement said.The regulator also said that it will 'actively explore and expand the ways and channels to use foreign exchange reserves.'
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