BEIJING -- The deputy governor of China's central bank said it could take "a couple of years" to loosen controls on the value of the nation's currency, despite exhortations by the Bush administration to move quickly so that Chinese exports lose some of their low-price advantage.
"We will do it according to Chinese reality to move forward steadily and firmly," Li Ruogu, deputy governor of the People's Bank of China, said in an interview surveying China's economy.
A teller at a Bank of China branch counts 100-yuan notes. The yuan has been fixed at a rate of about 8.3 per dollar since 1995.
(Claro Cortes Iv -- Reuters)
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"I think it probably needs a couple of years," Li said, while emphasizing that no deadline has been set for allowing the Chinese currency, the yuan, to move according to market forces. "China is not providing a time frame. We don't know what the time frame will be."
Li's comments suggest that Beijing is likely to take longer than Washington hopes, and financial markets expect, before de-linking the yuan from the fixed exchange rate of about 8.3 per dollar that has prevailed since 1995. The yuan's exchange rate is widely viewed by economists as too low, giving Chinese goods an extra edge in global markets. U.S. manufacturers and their champions in Congress have complained vociferously about the problem, and the Bush administration has urged Beijing to move speedily toward a free-floating rate, though Washington has accepted China's refusal to set a deadline.
In recent days rumors of a change in China's currency policy have swept global markets. Li's remarks may dampen that speculation.
The U.S. Treasury responded guardedly. "The Chinese leadership has made it clear that moving toward a flexible market-based currency is a top priority, and we take that seriously," said Tony Fratto, a department spokesman. "The sooner they do that, the better it will be for the Chinese economy and the international economy."
Asked whether Li's talk of "a couple of years" is disappointing, Fratto replied, "We're not commenting on time frames."
Critics of the administration's approach said Li's comments show that the Chinese need to be pressured much more aggressively.
"It's bad news, for the United States and for the global economy," said Morris Goldstein, a scholar at the Institute for International Economics. Goldstein has argued that China should raise the exchange rate of the yuan by about 15 to 25 percent. "The Treasury's strategy of trying to persuade China to move on the exchange rate has just come up empty," he said.
Until the yuan rises in value, Goldstein said, other Asian countries -- including Japan -- appear determined to keep their currencies artificially low, because they fear losing competitive ground to the Chinese. With Asian goods priced so cheap, the flood of imports from the region is fueling the U.S. trade deficit, which in turn is stoking fears of a sudden plunge in the dollar that could spark a financial crisis.
