China Says Dollar Swings May Pose Threat to the Global Economic Recovery
China Says Dollar Swings May Pose Threat
Nelson Ching/Bloomberg
China is likely to maintain “steady and relatively fast” growth in 2010, the central bank said in today’s report.
China is likely to maintain “steady and relatively fast” growth in 2010, the central bank said in today’s report. Photographer: Nelson Ching/Bloomberg
Sept. 17 (Bloomberg) -- Arnout Van Rijn, chief investment officer for Asia at Robeco Hong Kong Ltd., talks about China's currency policy. Treasury Secretary Timothy F. Geithner said the U.S. will use every available tool to urge China to let its currency rise more quickly, including congressional pressure and a twice-yearly report on foreign- exchange markets. Van Rijn also discusses Japan's intervention to weaken the yen and the impact of currency policies on Asian stock markets. He speaks with Rishaad Salamat on Bloomberg Television. (Source: Bloomberg)
China’s central bank said swings in the value of the dollar may threaten the global recovery, defending the benefits of currency stability after the U.S. stepped up pressure for faster gains in the yuan.
A rapid depreciation of the dollar could boost the price of commodities and cause asset bubbles, the People’s Bank of China said in a 2010 financial stability report posted on its website today. Fast gains could put pressure on commodity and capital markets, it said.
The central bank’s comments were published after the U.S. administration and lawmakers put the focus on the yuan at congressional hearings this week. Treasury Secretary Timothy F. Geithner said the U.S. will use every available tool to urge China to let its currency rise more quickly.
“Large fluctuations in the dollar’s exchange rate may impede the global economic recovery,” the Chinese central bank said today.
China kept its currency pegged to the dollar for almost two years until June 2010 as a response to the global financial crisis. The yuan has strengthened 0.9 percent in the past six days taking its gain since the fixed rate ended to 1.4 percent.
“When the dollar strengthens rapidly, global capital markets and prices on commodity markets are under pressure, leading to large market fluctuations and affecting the economies of some resource-producing nations,” the central bank said in the report. “On the other hand, the rapid depreciation in the dollar will cause increased commodity market prices and asset bubbles and affect financial and economic stability.”
‘Fast’ Growth
China is likely to maintain “steady and relatively fast” growth in 2010, the central bank said in today’s report. Challenges may include intensifying trade tensions and the uneven timings of stimulus exits in developed economies, the report said.
In the domestic economy, a rebound in demand is not yet on a solid foundation and “latent” fiscal and financial risks exist, it said. Inflation expectations are rising, with the dollar, commodity prices and domestic adjustments in resource and energy costs adding to uncertainties, it said.
A statement about the report was posted on the central bank’s website on June 30, indicating that it was completed before that date.
--Li Yanping, Judy Chen. Editors: Paul Panckhurst, Chris Anstey.
To contact Bloomberg News staff for this story: Li Yanping in Beijing at +86-10-6649-7568 or yli16@bloomberg.net
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