China defends exchange rate policy despite US pressure

BEIJING: China Thursday defended its exchange rate policy as necessary to help exporters and curb speculative money inflows, even as the United States steps up pressure on Beijing for a stronger currency.

Commerce ministry spokesman Yao Jian said claims that the yuan -- effectively pegged to the dollar since mid-2008 -- was responsible for US economic woes and global trade imbalances were baseless.

"It is totally unfounded to blame the yuan's exchange rate for (China's) trade surplus, US job losses and global economic imbalances or to brand China as a currency manipulator," Yao told reporters.

"Keeping the yuan stable is not only to support the export sector. It is also an important measure to effectively contain hot money flows."

Yao's remarks came after US President Barack Obama pushed Chinese President Hu Jintao on the currency issue during their talks in Washington this week, saying the yuan was "undervalued."

But Beijing has repeatedly said it will not bow to foreign pressure.

"The exchange rate is a sovereignty issue and we will make appropriate policy choices based on economic changes within and outside the country," Yao said.

US lawmakers, facing election-year pressure, have threatened sanctions against Beijing, saying China's action to keep the yuan artificially low against the dollar had resulted in a ballooning US trade deficit and a loss of American jobs.

Yao also predicted China's trade surplus would shrink by another $100 billion this year, with the monthly trade balance likely to remain close to deficit for the rest of the first half as global markets slowly recovered.

China recorded a trade deficit of $7.2 billion in March, its first monthly trade deficit in six years.

The commerce ministry has been a staunch defender of the currency policy, while the central bank has been hinting that a change in the exchange rate regime could be in the offing.