Thursday, November 03, 2005


'A Question Of Timing' For China Currency: Snow

The Financial Times interviewed Treasury Secretary John Snow and the Chinese currency came up. "FT: You policy has been..steady pressure but relatively gentle on issues like the currency and intellectual property rights. They’ve made commitments but no great evidence that things are improving on the ground."

"JS: The action they took in July was a historic step. They surprised most people with that announcement on July 21. What they did of course was to do the de-linking of the modest, I agree, revaluation of 2.1 per cent. But they reaffirmed the commitment to where they want to go and I’ve never seen any wavering of backtracking from that...It was interesting to see the front-page article [in the November 3 Asia edition of the FT, in which a Chinese central banker calls for a wider band]. We think a wider band would be helpful and desirable and in their interest."

"What else is going on over there, it’s important to keep in mind, is the continuing put in place through this CFTs the China foreign exchange trading system, a branch of the People’s Bank of China. To put in place the platforms to conduct foreign exchange trading and we forget that if you’re pegged you’ve got to learn how to trade, how to let the currency..They’re also putting a lot effort on the hedging devices, the futures and the puts and the calls on the currency to allow the forward market to work, the derivative market, the hedge market to work. That’s all consistent with their being committed to this objective of flexibility and to being on a path to get there."

"FT: Then it seems the other thing is there’s a difference between the China timetable and the political timetable of Congress here and that just seems to be the problem, not the substance but the timetable."

"JS: Yes..The folks in the Congress and the leadership on it are genuine in their concern. A misaligned currency contributes to global imbalances. They’re sincere and right in wanting to see movement. You’re right the fundamental issue here I think with us and the Chinese is the pace at which they move. We all recognise you’ve got to put in place, you’ve got to walk before you run. I think that they can move more without serious risks. With this move they’re creating around the move there’s been no disruption; there’s been no financial crisis. They’ve weathered it well. They’ve absorbed the changed valuation well. The system is accommodating to it without disruption of any kind, and that suggests to me that you can do a little more."

"You should do more. Our view is, yes we understand there are risks of moving too fast, there are also big risks of moving too slow and getting that balance right. As we look it at the margin there are more risks in going too slow than there are in going faster. That’s sort of the nature, the essence of this, that’s the nature of this give and take."

"FT: One quick last one. People outside and some people here have said you’re keen to get back to the private sector. Are people right when they say that?"

"JS: Some day I could certainly see myself back in the private sector, some day."

"FT: Soon?"

"JS: It’s like the Chinese know the direction, it’s a question of the timing."

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