China on Wednesday pledged to make its exchange rate more “flexible”, a day after the United States said the yuan was undervalued, though it declined to name Beijing a currency manipulator.
“China will continue to increase the flexibility of the renminbi (yuan) exchange rate,” Foreign Ministry spokesman Hong Lei told a regular news briefing in Beijing.
But in stronger remarks, China’s state news agency urged the United States to put an end to a “meaningless quarrel” over its yuan currency.
The US Treasury said Tuesday that China’s yuan is still significantly undervalued, although it refrained from saying Beijing manipulates the currency, which could lead to retaliatory action by Congress.
China’s official Xinhua news agency praised the US Treasury decision in a commentary, saying it sent a “positive signal” that would soothe financial markets and promote trade.
“It is time to move beyond the useless, meaningless quarrel over the exchange rate and look to the broader picture and new areas for both bilateral and global trade cooperation,” it said.
US officials have long accused China of keeping its currency artificially low, fuelling a flow of cheap exports that helped send the US trade deficit with China to more than $270 billion in 2010.
But China defends its exchange rate regime, saying it is moving gradually to make the yuan more flexible.
Hong said China was seeking to boost domestic consumption, in apparent response to accusations Beijing is keeping the value of the currency low to boost exports, instead of finding other drivers for economic growth.
The Xinhua commentary warned China will move at its own pace in making the yuan fully convertible.
Yuan “exchange rate reform and the internationalisation of the (yuan) will be a gradual and long-term process,” it said.
“Pushing for a sharp rise or decline in (the) exchange rate or seeking a once-for-all solution would be both unrealistic and harmful.”
The US Treasury said the yuan had risen 7.5 percent against the dollar in the 18 months since Beijing began allowing a managed appreciation, and by 12 percent if China’s high inflation rate is figured in.
Nevertheless, it called the level of appreciation “insufficient” and said more progress was needed.