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UPDATE 1-Yuan depreciation has been normal -China minister

Thu, Dec 4 2008, 12:14 GMT
http://www.afxnews.com

By Langi Chiang

BEIJING, Dec 4 (Reuters) - Fluctuations in China's exchange rate have been normal this week, with the yuan depreciating only because the dollar has been so strong, Commerce Minister Chen Deming said on Thursday.

China was committed to maintaining a stable yuan provided that there are not major changes in the world economy, Chen said at a press briefing on the sidelines of a U.S.-China economic dialogue in Beijing.

Weakness in the yuan this week versus the dollar has fuelled speculation that China may be engineering a depreciation to help cushion its exporters from the global economic downturn.

"The recent small fluctuation of the yuan against the dollar is quite normal. I would call it the U.S. dollar strengthening, rather than the yuan depreciating," Chen said.

Chen said that the fall-off in China's exports so far could be attributed to slack global demand, rather than to any currency effect.

Asked whether China might use yuan depreciation to support exporters, Chen replied: "I do not expect to rely on this."

Even as the dollar climbed against other currencies in recent months, the yuan remained tightly tied to it, losing little ground until Monday, when it had its biggest single-day depreciation since it was taken off a dollar peg in July 2005.

Managed in a narrow trading band against the dollar, the yuan has hit its bottom limit on four straight days as traders have suddenly come to expect moderate yuan depreciation.

Chen said the basic stability in the yuan's exchange rate from mid-September until this week was something China would like to see.

"If there is no big change in the international economic environment and everyone works to address the current crisis, I think we can keep such stability," he said.

He added that the depreciation this week had been very small, amounting to less than 1 percent, and any benefit for exporters would have been negligible.

U.S. Treasury Secretary Henry Paulson is visiting Beijing this week for economic talks. U.S. officials have said Paulson will push Chinese officials during his visit for yuan appreciation, in order to help balance China-U.S. trade.

U.S. officials told reporters after an opening round of talks on Thursday that Chinese officials had indicated they remained committed to currency reform.

(Writing by Simon Rabinovitch; Editing by Victoria Main) Keywords: CHINA YUAN/STABLE

(simon.rabinovitch@thomsonreuters.com; +86 139 0111 6692; Reuters Messaging: simon.rabinovitch.reuters.com@reuters.net)

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