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Hu defends China's currency system, pledges yuan stability

BANGKOK, Oct. 19 Kyodo

Chinese President Hu Jintao said Sunday that China will retain its fixed exchange rate system and maintain the stability of the yuan.

''China follows a market-based, single and managed floating exchange rate system, which is consistent with the current state of China's economy,'' Hu said ahead of talks with U.S. President George W. Bush expected to focus on the yuan, also known as the renminbi.

Speaking at a private-sector forum held on the sidelines of the annual summit of leaders of the Asia-Pacific Economic Cooperation (APEC) forum, Hu said a stable yuan not only benefits China but also Asia and the world.

''On the basis of this system, keeping the exchange rate of renminbi stable serves China's economic performance and conforms to the requirements of the economic development in the Asia-Pacific region and the whole world,'' Hu said.

His remarks defending the efficacy of China's current exchange rate system hints that China will not bow to U.S. pressure to stop pegging the yuan to the dollar at a fixed rate.

President Bush is likely to raise the issue with Hu during their bilateral meeting later in the day on the sidelines of the APEC gathering, which gets under way Monday.

The United States is anxious to see China and other Asian countries let their currencies appreciate so as to reduce the U.S. trade deficit with them, which would in turn boost manufacturing employment in the U.S.

But Hu pointed out that China had already refrained from devaluing its currency while other Asian neighbors kept their currencies down to boost competitiveness during the 1997 Asian financial crisis.

He said Beijing ''will follow the same approach of responsibility to the renminbi exchange rate issue at this time.''

''We will follow the basic stability of the renminbi exchange rate at a reasonable and balanced level, while further improving the rate-forming mechanism and deeper financial reform.''

Hu also expressed confidence that China's economy remains on track to achieve the government's target of 7% economic growth this year.

He said China is now trying to address some bottlenecks in the economy such as inadequate economic and industrial structure, pressures on employment, social security and lack of protection for the ecosystem.

Commenting on the collapse of recent global trade talks at Cancun, Mexico, Hu urged member countries of the World Trade Organization (WTO) to shelve their differences and seek common ground so as to ensure a successful conclusion to the WTO's Doha development round.

Responding to a question from the audience, he promised that China will further open its market and intensify cooperation with the international community.

''China will always be a positive force for stable development of the Asia-Pacific and the world beyond,'' he said.

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