UPDATE 1-China's Fin Min defends country's FX intervention

Wed Jul 9, 2014 7:35am EDT

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* China Fin Min defends Beijing's currency intervention

* Says hard to end intervention when China's economy is unsteady (Adds details, quotes)

BEIJING, July 9 (Reuters) - China's finance minister on Wednesday defended the country's currency interventions, saying it was difficult to take a hands-off approach when it came to the yuan, given an unsteady economy and abnormal capital inflows.

Speaking on the first day of annual high-level talks between China and the United States, Lou Jiwei said Beijing also faced challenges in managing hot money inflows resulting from the winding down of super-loose U.S. monetary policy.

"The U.S. side has constantly raised the issue about whether intervention is no longer needed in our foreign exchange policy," Lou told reporters at a briefing.

"But we say it's difficult when the economy has yet to fully recover, and cross-border capital flows are not normal."

The value of the yuan has been a thorny issue in bilateral ties between the world's two biggest economies, with U.S. leaders saying that China suppresses its currency to boost its export sales. China has always denied such accusations.

Turning to the health of China's economy, Lou said the days when China contributed to nearly half of global economic growth with large pump-priming projects plans are over.

While China aims to grow its economy by around 7.5 percent this year, Lou reiterated the government's earlier stance that the target was flexible and did not represent a minimum expansion rate that must be met.

"The 7.5 percent growth target is not the lower limit," Lou said.

As such, he said he hoped U.S. authorities could do their part to keep the U.S. economy growing at a steady clip, and that Washington should be mindful of the spillover effects of its ultra-loose monetary policy.

"The normalisation of U.S. monetary policy has drawn wide attention," Lou said. "We hope the U.S. side can act prudently.

"We look to the United States as the key for promoting global economic recovery...We hope the U.S. side could take effective measures to maintain good growth momentum." (Reporting by Kevin Yao; Writing by Ben Blanchard and Koh Gui Qing; Editing by Jeremy Laurence and Clarence Fernandez)

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