Treasury Review
China allowed the yuan to be freely convertible under the current account in
December 1996, removing limits on the use of foreign exchange for trade in goods
and services. Restrictions on inflows and outflows of money for investment
purposes, or the capital account, mean the currency market is dominated by
companies involved in trade.
China's foreign-exchange reserves jumped a third to $818.9 billion last year,
the world's second-largest after those of Japan, driven by exports and foreign
direct investment.
U.S. Treasury Secretary John Snow is under pressure from Congress to brand
China a manipulator of exchange rates, a step the U.S. hasn't taken since 1994.
Treasury officials sounded out investors about the potential impact of such a
finding, people familiar with the situation said on Feb. 15. The Treasury's
review is due on April 15.
China isn't manipulating the yuan and trade with the U.S. benefits both
nations, Ma Kai, chairman of the National Development and Reform Commission, the
nation's top economic planning agency, said in Beijing Friday.
Goods manufactured in China help U.S. consumers save $100 billion a year,
while U.S. companies last year hired 50,000 new workers to help import goods
from China, he said.
China won't bow to pressure from the U.S. to bring forward its timetable for
yuan flexibility, central bank Governor Zhou Xiaochuan told reporters in Beijing
on March 11. China will follow its ``own principles'' on yuan reform and current
fluctuations in the exchange rate are appropriate, he said.