You are here

Gold investment advisers get to work a big new market

Section: Daily Dispatches

By Rob Delaney
Bloomberg News Service
Saturday, April 23, 2005

BEIJING -- China may accelerate preparations to loosen the tie
between its currency and the U.S. dollar in response to intensifying
international pressure for the change, central bank Governor Zhou
Xiaochuan said.

"If there is more pressure from outside, it will force us to speed
up our reform," Zhou said at the Boao Forum in southern Hainan
island today, the first time China's government has said it may
alter its schedule for the exchange rate because of overseas
interests. He didn't give a timetable.

Finance ministers from the Group of Seven industrial nations last
weekend stepped up calls for China to ease the yuan's decade- old
peg to the dollar, which the U.S., Japan, and Europe say gives the
nation an unfair trade advantage. A more flexible yuan may help
China contain inflation and money supply growth amid record foreign-
exchange inflows.

"There's no urgency to take the measure," said Bert Hofman, lead
economist at the World Bank in Beijing. "For now, they are managing
quite well the capital inflows. Despite the buildup in foreign
reserves, monetary growth is fairly modest."

China's central bank buys and sells dollars to keep its currency at
about 8.3 to the dollar, regardless of market developments. Critics
say the yuan became undervalued as the dollar declined in recent
years, giving Chinese manufacturers a price advantage that's helped
drive the U.S. trade deficit to a record and hampered economic
growth in Europe.

China's foreign reserves, the world's second-biggest after Japan's,
jumped 50 percent to an all-time high of $659.1 billion at the end
of March from a year earlier, as exports surged and investors bet
the government will let the yuan appreciate.

Zhou said China welcomes international pressure because it will
force the nation to speed up needed financial reforms. Still, "we
don't see that the pressure is that strong right now," he said.

U.S. Treasury Secretary John Snow, who led the G-7's April 15-16
gathering in Washington, last week called for China to embrace a
more flexible exchange rate immediately. Canadian counterpart Ralph
Goodale said China should understand there is a "freight train
coming" as the U.S. Senate and European Union weigh tariffs or
import restrictions on Chinese goods.

The G-7's sharper rhetoric marked a shift in the group's efforts to
coax the world's fastest-growing economy into ending the peg. Some
investors said the strategy might backfire, making China less likely
to revalue because its leaders won't want to be seen as bowing to
outside influence.

"We have a very clear target in this regard, but we have our own
sequence," Zhou said at the forum, a two-day gathering of regional
leaders. "We are doing some preparation -- for example, the reform
of the financial sector -- to enlarge the role of the foreign-
exchange market."

Zhou also said overseas manufacturers that complain about the yuan's
value should first consider their competitiveness in the
international market. "For those companies with real competitive
advantage, they will not have to be concerned about the exchange
rate," he said.

China's central bank has to buy dollars that flow into the economy
to maintain the peg, pushing up money supply and making it harder
for the government to slow the economy and stem inflation by reining
in bank lending.

China's economy, the world's seventh-largest, grew by a more than
expected 9.5 percent in the first quarter, the government said last
week. Still, M2 money supply expanded 14 percent and inflation was
2.7 percent in March, both within the government's targets.

"The economic growth rate is not necessarily linked with inflation,"
Zhou said. "China has a very high savings rate and a lot of
investment. The economy may have a higher growth rate."

Zhou said China's inflation rate is "still tolerable." The
government will closely watch the producer price and consumer price
indexes when considering whether further interest rate increases are
needed, he said. The central bank raised its benchmark lending rate
for the first time in nine years on Oct. 29, by 0.27 percentage
point to 5.58 percent.

"Up to now, we can't say that the 9.5 growth rate in the first
quarter would really lead to high inflation," Zhou said.


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 sites:

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 First Ave., Suite 807
Denver, Colorado 80206
Michael Kosares, Proprietor

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

Gold & Silver Investments Ltd.
Mespil House
37 Adelaide Rd
Dublin 2
+353 1 2315260/6
Fax: +353 1 2315202

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

Lone Star Silver Exchange
1702 S. Highway 121
Suite 607-111
Lewisville, Texas 75067

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

The Moneychanger
Box 178
Westpoint, Tennessee 38486
Franklin Sanders
1-888-218-9226, 931-766-6066



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 $1,000 or more will, upon request,
be sent a print of Alain Despert's colorful
painting symbolizing our cause, titled GATA.

Donors of $200 or more will receive copies
of "The ABCs of Gold Investing" by Michael
Kosares, proprietor of Centennial Precious
Metals in Denver, Colorado, and "The Coming
Collapse of the Dollar" by James Turk and
John Rubino.

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.