Snow urges China to widen renminbi trading band
>By Andrew Balls and Edward Alden in Washington
>Published: November 3 2005 23:48 | Last updated: November 3 2005 23:48
>>
John Snow, US treasury secretary, has called on China to widen the trading band of the renminbi against the dollar, saying such action would demonstrate Beijing’s commitment to keep moving towards greater currency flexibility.
“We think a wider band would be helpful and desirable and in their interest,” Mr Snow said in an interview with the Financial Times.
“We understand there are risks in moving too fast, but there are also big risks in moving too slow. As we look at it at the margin, there are more risks in going too slow than there are in going faster.”
Mr Snow spoke late on Wednesday, before a private meeting that night with Alan Greenspan, Federal Reserve chairman, and Senators Charles Schumer and Lindsey Graham, co-sponsors of a bill that threatens to impose a 27.5 per cent tariff on Chinese imports unless there is a shift to greater currency flexibility.
A vote is scheduled on the bill before the end of this year’s congressional session, though in June the senators agreed, following a similar meeting, to delay such a vote. China broke the renminbi’s decade-long peg to the dollar in July, revaluing the currency by 2.1 per cent and saying it would allow a daily trading range of 0.3 per cent up or down. But there has since been little movement in the state-controlled currency market.
Mr Snow called the July action “a historic step. A lot of people thought they would never do it . . . By and large our efforts were being heavily discounted and their disposition to make a change was being heavily discounted.”
In meetings with China’s leaders in Beijing last month, Mr Snow warned that “serious support” remained for the Schumer-Graham bill in Congress, and urged action to allow the currency to appreciate against the dollar before President George W. Bush’s visit to China this month.
“The best way to respond to those feelings was concrete actions on the things that were giving rise to these political sentiments . . I was candid with them about this,” he said in the interview.
Mr Snow has been the main proponent of the US administration’s gentle diplomacy on the currency issue, welcoming the long-term commitment China has made to currency flexibility while opposing efforts to force it to move more rapidly. “It’s the right approach, it is the course best calculated to reach the result of movement to flexibility.” He added: “I don’t think they respond very well to threats.”
The problem is that China’s timetable for gradual reform may not satisfy demands in the US Congress for immediate action.
“The fundamental issue here with us and the Chinese is the pace with which they move. We know they can’t go all the way there tomorrow.”
Mr Snow said the initial revaluation was “modest” but the Chinese had reaffirmed their commitment to go further. The modest revaluation had brought no disruption to China’s financial system.
He said a rising renminbi was not going to solve the problem of global current account imbalances but it was a necessary part of the adjustment.
>