RBI chief backs case for stronger yuan, say reports

RBI chief backs case for stronger yuan, say reports
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First Published: Thu, Apr 22 2010. 09 35 AM IST
Updated: Thu, Apr 22 2010. 09 35 AM IST
Singapore: Reserve Bank of India (RBI) governor Duvvuri Subbarao backed US arguments for a stronger Chinese yuan, ahead of a meeting of the Group of 20 nations this week, reports said on Thursday.
“If China revalues the yuan, it will have a positive impact on our external sector,” Bloomberg quoted RBI chief as telling reporters in Mumbai on Wednesday.
“If some countries manage their exchange rate and keep them artificially low, the burden of adjustment falls on some countries that do not manage their exchange rate so actively.”
Asked if India give its opinion on the issue if it is raised at the G-20 meeting, Subbarao said: “When it is discussed we will certainly give our opinion or view on the subject.”
The Wall Street Journal carried similar remarks from the RBI chief.
Exports from China to India have grown faster than Indian shipments to its northern neighbour “and that obviously is a reflection of differences in the exchange-rate management,” Bloomberg quoted Subbarao as saying.
US President Barack Obama, who considers the yuan undervalued, is seeking broader support from G-20 finance officials who will discuss the outlook for the global economy in Washington from Thursday to Sunday.
Speculation that China may scrap the yuan’s peg to the dollar grew this month after treasury secretary Timothy Geithner delayed a report that could have branded the country a currency manipulator.
Brazil’s central bank chief Henrique Meirelles told a senate hearing on Tuesday that it was “absolutely critical” for the good of the global economy that China let its currency appreciate, joining a chorus of critics of Beijing’s foreign exchange policy.
China has effectively pegged its currency at about 6.83 to the dollar since July 2008 to protect its exporters from the worst of the global financial crisis. It had allowed it to appreciate 21 percent in the previous three years.
Reiterating Beijing’s stance on the issue, China’s vice commerce minister Fu Ziying said on Wednesday in Gabon that the country would not be subject to international pressure to revalue the yuan and will reform the currency based on economic conditions.
The comments came just days after a leading US lawmaker warned that the United States would take action if China did not begin to take steps soon to raise the value of the currency.
Many Western economists believe the yuan is undervalued by as much as 40%, giving China an unfair advantage in world trade.
Beijing says it will not be prodded into revaluing before it is ready, but many analysts expect it to start loosening its tight grip on the yuan this year as China’s economy races ahead.
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First Published: Thu, Apr 22 2010. 09 35 AM IST
More Topics: Yuan | RBI | D Subbarao | Currency | Dollar |