(Canadian Press)
The Bush administration's
effort to increase pressure on China to overhaul its currency regime got less than rave reviews from Federal Reserve chairman Alan Greenspan and key central bankers from China, Europe and Japan.
Greenspan disputed the contention of U.S. manufacturers that a revaluation of China's yuan would make a significant impact on America's soaring trade imbalances.
Zhou Xiaochuan, the head of China's
central bank, rejected the administration's contention that China was ready to move immediately to a more flexible currency. And Jean-Claude Trichet, the head of the European Central Bank, and Toshiro Moto,
deputy governor of the Bank of Japan, both said the timing of any move should be left up to China.
The four men made their comments while appearing on a panel of central bank governors at a monetary
conference being held in Beijing. Greenspan participated late Monday (Tuesday morning Beijing time) by satellite from Washington.
The Bush administration in recent weeks has intensified the pressure
on China to stop linking the yuan at a fixed rate to the dollar, a practice that American manufacturers say has undervalued the yuan and given China a huge trade advantage.
Greenspan, however, said
in response to an audience question that getting China to stop linking its currency tightly to the U.S. dollar would have little impact on America's trade deficit with China, which hit a record $162 billion
US last year, the largest imbalance ever recorded with a single country.
"It certainly is not going to be a major impact" on America's trade deficit, Greenspan said, asserting that any
sales China loses in the United States would probably be made up by sales from other countries.
But Greenspan did argue it was in China's interest and the interest of the global economy because it
would end distortions in China's monetary system and also make China's economy more flexible.
"Allowing revaluation in some form is very much to the advantage of the Chinese and I am certain
they will take it on reasonably soon," the Fed chairman said.
Xiaochuan told the conference that there was "too much expectation" about how a change in China's currency practices would
impact trade flows and the global economy.
He also said more reforms were needed to prepare for a change, a comment at odds with the Bush administration which in recent months has been insisting that
China is ready to make the switch currently.
Trichet said China should decide on the timing of any currency move and that other nations need to do their part to support global growth, including
higher savings rates in the United States and less impediments to growth in Europe and Japan.
"We all have to contribute to a better handling of the planet," Trichet said.
Greenspan
told the conference that he does not have a good explanation for why long-term interest rates have been falling at a time when he and his Fed colleagues have been raising short-term rates, a development he
said was "clearly without recent precedent" and one he called in February a "conundrum."
The Fed has boosted a key short-term rate, the federal funds rate, a total of eight times
since last June 30, moving it up in quarter-point increments from a 46-year low of 1 per cent to its current level of three per cent.
But over that same time period, Greenspan noted, the yield on
Treasury's benchmark 10-year note has fallen from around 4.8 per cent a year ago to around four per cent currently.
Greenspan said the continued decline in long-term interest rates has not been a
development just in the United States but in many other countries around the world.
There have been a number of explanations for this development, including the suggestion that heavy foreign buying
of U.S. Treasury securities was keeping U.S. rates low. But Greenspan said a Fed study estimated that this impact was "modest" given the overall size of the U.S. Treasury market.
In his
comments, Greenspan also included a warning to operators of large hedge funds, investment vehicles for wealthy individuals.
He said that if fund managers continue to pursue more risky investments to
enhance returns, "the hedge fund industry could temporarily shrink and many wealthy fund managers and investors could become less wealthy.
|
