GATA issues international press release about central banker''s suppressed speech


By Mark Drajem
Bloomberg News
Sunday, October 3, 2004

WASHINGTON -- China offered no new timetable for
changing a 9-year-old peg of its currency to the
dollar, and warned U.S. policy makers not to press
too hard for a change.

"What we are trying to do is create the conditions for
a market-based exchange rate," Central Bank Deputy
Governor Li Ruogu told bankers at a luncheon in
Washington. "If you force China to change it will hurt
the United States. You destroy a goose that will give
you a golden egg."

Calls for change in the Chinese exchange rate, set
at 8.3 to the dollar since 1995, have grown louder
since the Group of Seven industrialized nations first
recommended more "flexibility" in September 2003.
China on Friday pledged to "push ahead firmly and
steadily" toward a more flexible exchange rate
without providing a timetable for the shift from its
currency peg.

"I don't see any indication that they're going to move
any quicker," said Morris Goldstein, an economist
at the Institute of International Economics who has
called for China to raise the yuan. "There's not very
much to point to in terms of tangible results from the
quiet diplomacy the U.S. has been pushing."

The U.S. and Japan say China's currency is at a
depressed level, giving Chinese producers an unfair
advantage by making their goods cheaper abroad.

U.S. manufacturers and Democratic lawmakers last
week said the undervalued yuan has hurt exports and
cost 2.7 million American factory jobs since January
2001. They sent a formal petition to President George
W. Bush's trade office to take their complaint to the
World Trade Organization.

"I don't think it's a WTO issue," Li said to an audience
that included Harvard University economist Martin
Feldstein and Citigroup Inc. Senior Vice Chairman
William Rhodes.

"No matter how this is worked out, these jobs will not
go back to the United States," he added.

The current economic arrangement is allowing
Chinese companies to deliver low-cost goods to U.S.
consumers, and in order to reduce the trade deficit
the onus is on Americans, he said.

"To change the current account deficit, the U.S.
people have to save more," he said.

International Monetary Fund Managing Director Rodrigo
de Rato said last week that now is "a very good moment"
to change the currency regime. And Treasury Secretary
John Snow said on Friday, "I would like to see China
move more quickly."

Chinese officials, including Zhou Xiaochuan, governor of
the People's Bank of China, have talked about scrapping
the peg to the dollar in favor of a link to a basket of
currencies for at least two years. The central banker, who
met with finance ministers from the Group of Seven
industrialized nations for the first time on Friday, said in
April that giving markets a greater role in setting the
value of the yuan is a "top priority."

Li said today that China needs to reform its banking
sector first before it can change its exchange rate policy.

"How long it will take to get there, I don't know," he said.

Goldstein and the IMF say China needs to raise the value
of the currency in order to ease inflationary pressure.

Li today countered that China has already taken enough
measures to temper growth.

"Starting from last year, we did see some over investment
in some areas," he said. "We tried to mitigate the
problems. Investments have come down, credits are
gradually coming down, all these figures tell as so far, so

Li said eventually the economy will come to a level that
is sustainable and that a 7-8 percent growth target would
allow for a healthy economy for 20 more years.

Some analysts, such as Goldman Sachs Group Inc.
Managing Director Robert Hormats, say an immediate
revaluation could drive up U.S. interest rates, because
it would curb Chinese demand for U.S. Treasury debt.

"What you have in China is a demand gap, but what we
have in the U.S. is a savings gap," Hormats said in an
interview before a meeting with Li today. "The real
question is whether we can raise our savings rate, both
public and private."


To subscribe to GATA's dispatches, send an e-mail to:

To unsubscribe, send an e-mail to:



Free sites:
(Korelin Business Report -- audio)
(In Spanish)
(In English)

Subscription site:

Eagle Ranch discussion site:

Ted Butler silver commentary archive:



Blanchard & Co. Inc.
909 Poydras St., Suite 1900
New Orleans, Louisiana 70112

Centennial Precious Metals
3033 East 1st Ave., Suite 403
Denver, Colorado 80206
Michael Kosares, Proprietor
US (800) 869-5115
Canada 1-800-294-9462
European Union 00-800-2760-2760
Australia 0011-800-2760-2760

Colorado Gold
222 South 5th St.
Montrose, Colorado 81401
Don Stott, Proprietor

El Dorado Discount Gold
Box 11296
Glendale, Arizona 85316
Harvey Gordin, President
Office: 623-434-3322
Mobile: 602-228-8203

Investment Rarities Inc.
7850 Metro Parkway
Minneapolis, Minnesota 55425
Greg Westgaard, Sales Manager
1-800-328-1860, Ext. 8889

178 West Service Road
Champlain, N.Y. 12919
Toll Free:1-877-775-4826
Fax: 518-298-3457
620 Cathcart, Suite 900
Montreal, Quebec H3B 1M1
Fax: 514-875-6484

Lee Certified Coins
P.O. Box 1045
454 Daniel Webster Highway
Merrimack, New Hampshire 03054
Ed Lee, Proprietor

Miles Franklin Ltd.
3015 Ottawa Ave. South
St. Louis Park, Minn. 55416
1-800-822-8080 / 952-929-1129
fax: 952-925-0143
Contacts: David Schectman,
Andy Schectman, and Bob Sichel

Missouri Coin Co.
11742 Manchester Road
St. Louis, MO 63131-4614

Resource Consultants Inc.
6139 South Rural Road
Suite 103
Tempe, Arizona 85283-2929
Pat Gorman, Proprietor
1-800-494-4149, 480-820-5877

Swiss America Trading Corp.
15018 North Tatum Blvd.
Phoenix, Arizona 85032
Dr. Fred I. Goldstein, Senior Broker



If you benefit from GATA's dispatches, please
consider making a financial contribution to
GATA. We welcome contributions as follows.

By check:

Gold Anti-Trust Action Committee Inc.
c/o Chris Powell, Secretary/Treasurer
7 Villa Louisa Road
Manchester, CT 06043-7541

By credit card (MasterCard, Visa, and
Discover) over the Internet:

By GoldMoney:
Gold Anti-Trust Action Committee Inc.
Holding number 50-08-58-L

Donors of $750 or more will, upon request,
be sent a print of Alain Despert's colorful
painting symbolizing our cause, titled "GATA."

GATA is a civil rights and educational
organization under the U.S. Internal Revenue
Code and contributions to it are tax-deductible
in the United States.