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GATA distributes worldwide press release on query to Treasury about gold seizure
By Edith M. Lederer
Associated Press
Wednesday, January 26, 2005
DAVOS, Switzerland -- China has lost faith in the stability of the
U.S. dollar and its first priority is to broaden the exchange rate
for its currency from the dollar to a more flexible basket of
currencies, a top Chinese economist said at the World Economic Forum.
At a standing-room only session focusing on the world's fastest-
growing economy, Fan Gang, director of the National Economic Research
Institute at the China Reform Foundation, said Wednesday that the
issue for China isn't whether to devalue the yuan but "to limit it
from the U.S. dollar."
But he stressed that the Chinese government is under no pressure to
revalue its currency.
China's exchange rate policies restrict the value of the yuan to a
narrow band around 8.28 yuan, pegged to US$1. Critics argue that the
yuan is undervalued, making China's exports cheaper overseas and
giving its manufacturers an unfair advantage. Beijing has been under
pressure from its trading partners, especially the United States, to
relax controls on its currency.
"The U.S. dollar is no longer -- in our opinion is no longer --
(seen) as a stable currency, and is devaluating all the time, and
that's putting troubles all the time," Fan said, speaking in English.
"So the real issue is how to change the regime from a U.S. dollar
pegging ... to a more manageable ... reference ... say Euros, yen,
dollars -- those kind of more diversified systems," he said.
"If you do this, in the beginning you have some kind of initial
shock," Fan said. "You have to deal with some devaluation pressures."
The dollar hit a new low in December against the euro and has been
falling against other major currencies on concerns about the ever-
growing U.S. trade and budget deficits.
Fan said last year China lost a good opportunity to do revalue its
currency, in July and October.
"High pressure, we don't do it. When the pressure's gone, we forgot,"
Fan said, to laughter from the audience. "But this time, I think
Chinese authorities will not forget it. Now people understand the
U.S. dollar will not stop devaluating."
Asked how speculation about revaluation could be curbed, he noted
that China imposed a 3 percent tariff on Chinese exports.
Some Chinese experts say that perhaps inflation can be reduced this
year, "but I'm not that optimistic," Fan said, noting that fuel
prices keep rising.
"So maybe China (will) have 4-5 percent inflation in 2005," he said.
Fan, whose nonprofit institute specializes in analyzing the Chinese
economy, stressed that the country's development is a long-term
process that will take decades, maybe a century.
Since China's economic modernization began over a decade ago, 120
million rural laborers have moved into cities, but another 200 or 300
million people need to move into the cities from the countryside to
spur development, he said.
"The income disparity is huge, and income disparity will stay with us
for a long time, as long as those 200 to 300 million rural laborers
stay in the countryside," Fan said.
Nonetheless, William Parrett, chief executive of Deloitte Touche
Tohmatsu, told the panel that Chinese companies are making
significant progress in becoming global giants, led by state-owned
companies.
"It's probably at least 10 years before the objective of the
government of 50 of the largest 500 companies in the world being
Chinese" is achieved, he said.
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----------------------------------------------------
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----------------------------------------------------
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