Japan wants China to alter yuan's exchange rate slowly

Asian Economic News, Feb 17, 2004

TOKYO, Feb. 12 Kyodo

A top Finance Ministry official said Thursday he hopes China will review its fixed exchange rate system for the yuan flexibly and slowly in a way that will not affect other Asian economies.

''I hope they will do it in a flexible manner and slowly,'' Hiroshi Watanabe, director general of the ministry's International Bureau, told reporters.

Watanabe said China's trading partners such as South Korea and Singapore are exporting value-added products to China and a sudden change ''should deal a fatal blow to neighboring countries'' other than Japan.

He made the remarks in response to reports that the People's Bank of China, China's central bank, has made reviewing its fixed exchange rate mechanism for the yuan a priority for 2004.

Currently, the yuan is effectively pegged in a tight range of around 8.27 to the U.S. dollar. But international pressure has been mounting on Beijing to change the policy because an undervalued yuan has caused China's exports to soar.