MercoPress. South Atlantic News Agency

More US pressure on Chinese renminbi rigidity

United States Treasury Secretary John Snow currently visiting Beijing insisted that China must make its currency the yuan or renminbi pegged to the US dollar, “more flexible”.

However Mr. Snow pointed out that Beijing authorities have been working hard to end the exchange rigidity of the renminbi vis-à-vis the greenback.

"They made great progress with their financial system, they are committed to it" added Mr. Snow regarding a possible flotation or revaluation of the Chinese currency for which United States has been lobbying ever more intensely.

"This is the moment. However the calendar belongs to Beijing authorities".

Beijing has kept the yuan locked to 8,28 to the US dollar for fourteen years and the US worries about China's ever expanding trade surplus and the loss of US jobs.

Mr. Snow who previously had said that the revaluation move ought to be sooner rather than later, warned that "China risks knocking the economy off balance if it didn't".

US Congress currently has a bill before Congress threatening 27,5 billion US dollars across the board sanctions if revaluation does not come soon in the face or a 2004 trade deficit with China totalling 162 billion US dollars.

Last week China's Deputy Finance Minister Li Yong said that the upward pressure on the yuan was largely domestic rather than foreign and "not so great" and urged patience.

Mr. Yong said that China must first get its market mechanisms in order, repairing the banking system burdened with persistent (corruption) problems and huge bad debts.

Apparently Beijing has plans to improve bank balance sheets using China's huge international reserves, 650 billion US dollars, most of which are in US government bonds to help keep the yuan down.

Several of China's big banks have already received multi billion dollars injection as part of a plan for possible sell-off.

On the other hand analysts believe that US tariffs threats are not really effective since so many US industries, and jobs, depend on Chinese imports.

"China will change the peg when conditions are right for China", indicated Mr. Yong. Bets are that there could be news in the coming three/four months.