China promised yesterday to keep its exchange rate stable and said it would use part of its US$1.95 trillion in foreign currency reserves to boost imports and consumer spending to combat the global financial crisis.
Chinese exporters that face plunging sales want the yuan devalued to make their goods cheaper abroad. But economists say they see no sign Beijing will take such a step, which could fuel tensions with its trading partners.
“We will maintain the basic stability of the renminbi exchange rate at a reasonable and balanced level,” Deng Xianhong (鄧先宏), a deputy administrator of China’s State Administration of Foreign Exchange, said at a news conference, referring to the currency by its official name.
“The important thing is to prevent the exchange rate from making big fluctuations,” he said. “This will not only be good for China and the world but also will be good for tackling the international financial crisis.”
The yuan was allowed to rise by about 21 percent against the US dollar from the middle of 2005 until the middle of last year in government-controlled trading, but it has held steady since July at about 6.85 to the US dollar.
Economists say a weaker yuan would do little to boost Chinese exports because demand abroad is too weak. They say a devaluation could cause serious repercussions, triggering a round of similar moves by other exporters and straining global trade relations at a time when coordinated action is needed to revive trade and finance flows.
Beijing is also looking at how to use its foreign reserves in its effort to boost consumer spending and imports, said Fang Shangpu (方上浦), another deputy administrator of the foreign exchange agency.
“We will step up support for the government’s policy of increasing imports and boosting domestic demand,” Fang said.
He gave no details, but said the agency would also ease access to financing for “enterprises that are going to make outward investment.”
China’s reserves, the world’s largest, rose by US$417.8 billion over the course of last year, but the growth slowed sharply toward the end of the year. Its forex reserves reached US$1.95 trillion by the end of last year.
Deng said some foreign companies were pulling money out of China because of financial demands elsewhere amid the global crisis. But he said the capital outflow was “very limited” and the government had the capacity to cope with it.
“By the end of 2008, the national foreign exchange reserve assets on the whole were kept safe,” Deng said. “We provided abundant liquidity [for the country] to cope with the crisis and at the same time we also made some profits.”
However, he warned that the financial crisis had not yet bottomed out and its negative impacts would continue to be felt.
“China holds nearly US$2 trillion in foreign exchange reserves that is [exposed] to the international market. It certainly faces grave challenges,” Deng said.
CROSS-STRAIT TENSIONS: MOFA demanded Beijing stop its military intimidation and ‘irrational behavior’ that endanger peace and stability in the Indo-Pacific region The Presidential Office yesterday called on China to stop all “provocative acts,” saying ongoing Chinese military activity in the nearby waters of Taiwan was a “blatant disruption” of the “status quo” of security and stability in the Indo-Pacific region. Defense officials said they have detected Chinese ships since Monday, both off Taiwan and farther out along the first island chain. They described the formations as two walls designed to demonstrate that the waters belong to China. The Ministry of National Defense yesterday said it had detected 53 military aircraft operating around the nation over the past 24 hours, as well
‘LAGGING BEHIND’: The NATO secretary-general called on democratic allies to be ‘clear-eyed’ about Beijing’s military buildup, urging them to boost military spending NATO Secretary-General Mark Rutte mentioning China’s bullying of Taiwan and its ambition to reshape the global order has significance during a time when authoritarian states are continuously increasing their aggression, the Ministry of Foreign Affairs (MOFA) said yesterday. In a speech at the Carnegie Europe think tank in Brussels on Thursday, Rutte said Beijing is bullying Taiwan and would start to “nibble” at Taiwan if Russia benefits from a post-invasion peace deal with Ukraine. He called on democratic allies to boost defense investments and also urged NATO members to increase defense spending in the face of growing military threats from Russia
LEAP FORWARD: The new tanks are ‘decades more advanced than’ the army’s current fleet and would enable it to compete with China’s tanks, a source said A shipment of 38 US-made M1A2T Abrams tanks — part of a military procurement package from the US — arrived at the Port of Taipei early yesterday. The vehicles are the first batch of 108 tanks and other items that then-US president Donald Trump announced for Taiwan in 2019. The Ministry of National Defense at the time allocated NT$40.5 billion (US$1.25 billion) for the purchase. To accommodate the arrival of the tanks, the port suspended the use of all terminals and storage area machinery from 6pm last night until 7am this morning. The tanks are expected to be deployed at the army’s training
FORUM QUARREL: China’s TAO took unfriendly action against Taiwan with its ‘22 guidelines’ against ‘independence diehards’ and reporting system, the council said The government’s denial of permits for Shanghai Municipal Taiwan Affairs Office (TAO) Director Jin Mei (金梅) and nine Chinese journalists to attend the Twin-City Forum in Taipei next week were to protest against and express disapproval of China’s 22-point set of “guidelines” to penalize “diehard” Taiwanese independence separatists, the Mainland Affairs Council (MAC) said yesterday. Beijing on June 21 unveiled the “22 guidelines” that allow its courts to try “Taiwan independence separatists” in absentia, with the death sentence applicable. The government must review permit applications based on the cross-strait situation, the MAC said. China’s Taiwan Affairs Office took unfriendly action against Taiwan
RSS