China's Commerce Minister Stresses Yuan Stability, Concerned about U.S. Dollar Value

ANKARA, Jan.  -- China's Commerce Minister Chen Deming said here Thursday the stability of the Chinese currency contributes to the recovery of the world economy while voicing concerns over the strength of the U.S. dollar.

 "The Chinese government has stated on many occasions it will keep the exchange rate of the yuan, or Renminbi, basically stable," said Chen during a visit to the Turkish capital Ankara, adding "We feel that is an important support and contribution for the world economy, which is undergoing a crucial period of recovering."
 
An unstable currency of China, whose trade volume accounts for about 10 percent of the world's total, would have a great impact on the global trade, Chen told a joint press conference with Turkish State Minister for Foreign Trade Zafer Caglayan.

China's major trade partners have complained about an undervalued yuan, which they said give price advantages for Chinese exports. The yuan has gained more than 21 percent against the greenback since the currency was unpegged from the U.S. dollar in July 2005.

Chen said China will press ahead with reforms for a controllable, freely floating Renminbi exchange rate, while reiterating China's concerns about the value of the U.S. dollar.

"Recently we're more concerned about whether the U.S. dollar can maintain its stability and strength, as China holds a large amount of U.S. dollar-denominated bonds," said Chen.

China is the biggest holder of U.S. Treasury securities, with its holdings totaling 798.9 billion U.S. dollars in value as of the end of October 2009, according to U.S. Treasury data.

Caglayan, who met Chen on Thursday morning, said the two sides had discussed the possibility of using local currencies in bilateral trade and China's purchase of Turkish bonds.

Chen said China is experimenting with Renminbi settlement with countries which have relatively balanced bilateral trade with China and that the practice will be expanded and promoted after maturing.

China announced in December last year it would start allowing Renminbi settlement of international accounts on a trial basis.

The government announced last month it would increase the number of pilot cities carrying out yuan settlements in foreign trade from the current five -- Shanghai, Zhuhai, Guangzhou, Shenzhen and Dongguan -- to help export companies avoid foreign exchange rate fluctuations.

 In those pilot cities, Chinese enterprises have the right to decide on their own whether they use the yuan or the U.S. dollar in settlement, said Chen.

China and Turkey saw their trade surge from about 1 billion U.S. dollars in 2000 to about 12.6 billion U.S. dollars in 2008, but Turkey witnessed a huge trade deficit with China, said Chen.

"China has no intention of expanding the trade surplus with Turkey," he told reporters, "we hope we can achieve trade balance gradually through the work of both sides, especially the efforts of our enterprises."

China will further encourage Turkish companies to sell products to China and Chinese enterprises to invest in Turkey to reduce the imbalance.

Chen Deming arrived at Ankara Wednesday evening on a four-day visit to Turkey and will go to Istanbul on Jan. 8.