India''s securities board issues rules for exchange-traded funds in gold


By Rex Nutting
Saturday, April 22, 2006

WASHINGTON -- A top Chinese official said Saturday the dollar
represents a greater risk to the global economy than the yuan does.

Rather than monitoring the yuan, global financial institutions
should watch the U.S. dollar, said Zhou Xiaochuan, the governor of
the Peoples' Bank of China.

Later in an interview, Zhou said the yuan could rise at a faster
pace, but that's not the Chinese way of economic reform.

"Probably it could be a little bit faster but it is not the way of
Chinese reformers to do things," Zhou said in the interview.

Chinese reforms must be "gradual" to balance competing interests and
insure that the financial sector is strong enough, Zhou said.

He hinted that the Chinese could speed up the pace of appreciation
in six months after more study about the impact that it's had on the

"Global trade, settlements and reserve assets are heavily reliant on
a single currency," Zhou said in remarks to the International
Monetary Fund. "The fund should give priority to establishing a
surveillance and check-balance mechanism of the major reserve
currency countries."

"Favorable conditions in the financial markets do not rule out the
possibility of a sudden reversal in sentiment," Zhou said. The lack
of coordination in the G7 on monetary policy "could result in large
and volatile movements of financial markets."

"We cannot ignore the risk of disorderly adjustments in financial
markets," Zhou said.

Coming a day after the Group of Seven singled out China for its
inflexible foreign exchange rate, Zhou said it is up to the
developed nations to use this period of strong growth to restructure
their own economies to rebalance global trade and capital flows and
to damp protectionism.

"In particular, the developed countries, while enjoying low-cost
imported goods and services, have to restructure their industrial
sectors quickly to create job opportunities and export advantages to
improve their competitiveness and dampen protectionism," Zhou said
in prepared remarks to the International Monetary Fund's policy-
making committee.

For its part, China has moved to "expand domestic demand, encourage
consumption, open its markets, improve the exchange rate regime, and
restructure trade," Zhou said.

On Friday, the G7 addressed growing global imbalances in trade and
capital flows, suggesting that China in particular should adopt a
more flexible exchange rate. The United States has complained that
the Chinese have kept the yuan's value low to promote exports.

"We don't worry too much what other people say," Zhou said in the
The G7 also said their own nations should restructure their
economies to help right the imbalances.

In his remarks, Zhou defended the yuan, saying IMF currency
surveillance is welcomed within the fund's objective of promoting
stability and respecting the autonomy of its member countries.

"Each country is entitled to choose an exchange rate system
consistent with its own economic development," he said. He defended
the progress on making the yuan more flexible.

Because China's markets and institutions are still developing, "it
is hard to obtain a dependable estimate of their equilibrium
exchange rate levels," he said.

* * *

Zhou Says Gradual Rise in Yuan is Best

By Greg Robb
Saturday, April 22, 2006

WASHINGTON -- A top Chinese economic official defended the gradual
appreciation of the yuan on Saturday, saying the slow approach fits
in with the consensus reached in Washington this weekend about what
needs to be done to rebalance the global economy.

"Probably it could be a little bit faster but it is not the way of
Chinese reformers to do things," said Zhou Xiaochuan, the governor
of the Peoples' Bank of China, in an interview.

Chinese reforms must be "gradual" to balance competing interests and
insure that the financial sector is strong enough, Zhou said.

Chinese officials are re-examining the impact of currency
appreciation on the various sectors. "It could take something around
a half a year," he said. "And then you could observe after that the
floating of the renminbi accelerated." The yuan is also known as the

Zhou said Chinese money growth was faster than expected in the first
quarter but said he was cautious about reaching any "determinative
conclusions" because of seasonal factors.

"But I agree monetary expansion is faster than we expected so we
should use some monetary policy to slow down," he said.

Zhou spoke a day after the Group of Seven large industrial nations
singled out China for criticism and called for China to move faster
to a flexible currency.

"We don't worry too much what other people say," Zhou said.

Zhou argued that China's gradual approach fits into the consensus
that has emerged this weekend that all countries must do their part
to reduce the danger from large U.S. current account deficit, which
he said could lead to an abrupt and disorderly selloff.

He wouldn't comment on what steps he thought the Bush administration
should take to increase national savings. Many economists at the IMF
meetings agreed that the U.S. "needs some kind of adjustment."

"I don't want to say which ones I think are important or feasible,"
Zhou said.

But if the U.S. increased domestic savings and China moved toward a
domestic demand economy, global imbalances "can be gradually
improved," he said.

The U.S. Treasury Department is scheduled to release a report soon
that could brand China as a currency manipulator, which could lead
to further strained relations.

Zhou said China rejected the notion of currency manipulation. "We
don't accept the concept of currency manipulation; it is not a
clearly defined economic concept," he said.

He said sovereign nations have the right to choose their own
currency regime. Zhou made the same point in a speech to the
International Monetary Fund meetings earlier Saturday, where he
suggested that the dollar is a greater potential destabilizing risk
to the global economy than the yuan is.

When asked about the U.S. Treasury argument that faster appreciation
would be good for China, Zhou scoffed and said the Americans were
being "political" and noted that an election is coming up this fall
in the United States.

"We know the U.S. has pressures -- employment issues and elections
and the credibility of the government," Zhou said. "For China, we
could also say that the current state is not only good for China but
also for the rest of the world and also good for the U.S. because we
are using our foreign exchange reserves to buy U.S. Treasury bonds
and subsidize U.S. consumers."

"Right now, the speed of moving forward is OK," he said. "It's good
for China."


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