Former US commerce chief backs China on currency

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Last updated at: (Beijing Time) Tuesday, October 28, 2003

Former US commerce chief backs China on currency

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China is right to resist a quick revaluation of its yuan currency, a move that could cost jobs and rock its already rickety financial system, former U.S. Commerce Secretary Michael Kantor said on Tuesday.

Addressing a financial forum in Beijing, Kantor's comments came as current Commerce Secretary Don Evans, also in China's capital, delivered tough words on a ballooning trade imbalance with China.

Many U.S. politicians and manufacturers have said China's policy of keeping the yuan pegged at around 8.28 to one dollar gives Chinese exports an unfair price advantage and makes it tough for U.S. goods to compete.

Kantor, commerce chief during the Clinton administration and now head of global trade practice at a law firm in Washington, voiced support for China's go-slow approach to freeing up the currency, also called the renminbi.

"A rapid, unplanned revaluation upwards, the inevitable result of floating the renminbi, would increase the burden of renminbi-denominated debt, making the balance sheet problem of Chinese banks and state-owned enterprises harder to correct," Kantor said.

It could also fuel unemployment and drag on China's economy, which could in turn curtail Chinese imports of U.S. products, Kantor said.

"A rapid revaluation of the renminbi is not in the best interests of China, or the best interests of the Asian economy or the best interests of the world economy," he said.

China and other Asian countries were also helping to finance the U.S. federal budget deficit by using the dollars they earned from exports to buy U.S. Treasury bills, he said.

"If China and Japan were to reverse course, they would start selling Treasury securities and that could drive interest rates even higher," he said.

(Source:agencies)

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