* U.S. Treasury Secretary to visit Beijing on Thursday
* China planning alerts exporters to yuan risks
* China c.bank researcher urges currency reform
By Aileen Wang and Simon Rabinovitch
BEIJING, April 7 U.S. Treasury Secretary Timothy
Geithner will hold talks in Beijing on Thursday against a
background of fresh signals from Chinese policymakers that they
might be paving the way to let the yuan resume its rise.
The National Development and Reform Commission (NDRC), the
nation's top economic planner, said China would monitor exchange
rate risks facing exporters, while an economist from the agency
said Beijing should edge towards a more flexible yuan.
"We should keep the yuan basically stable at a balanced and
reasonable level, while strengthening analysis and monitoring
and making announcements about risks in a timely manner to
reduce exporters' risks and losses," the NDRC said in a policy
overview issued on the central government's website, www.gov.cn.
The statement suggested policymakers are weighing what may
happen if they let the yuan recommence its climb after keeping
it yoked to the dollar since mid-2008.
The yuan will presumably be at the top of Geithner's agenda
when he meets Chinese Vice Premier Wang Qishan on Thursday on
his way home from financial partnership talks in India.
For graphic on U.S.-China trade and the yuan
A U.S. Treasury spokesman, accompanying Geithner in Mumbai,
declined to talk about the subject matter of the meeting and
said there would be no further statements about it.
"The secretary and the vice premier have been working
together to find an opportunity to meet in person for some time.
The meeting was confirmed yesterday," he said.
Washington has pressed Beijing to lift the value of the
yuan, which critics say is held so low against the dollar that
Chinese producers enjoy a grossly unfair advantage in global
The NDRC is a sprawling agency in charge of industrial
policy that has a stronger voice than almost any other
government agency, including the central bank, in China's
decision-making process about the currency.
Following "stress tests" to examine how exporters would cope
with appreciation, the NDRC's comments were possibly a sign the
government wants to warn export firms to be ready for a stronger
currency that could threaten already-thin profit margins.
Zhang Yansheng, director-general of the Institute for
International Economic Research, a think-tank under the NDRC,
said China wanted a freer-floating currency but was also wary of
the potential pitfalls.
"We also want the yuan exchange rate to be more flexible and
based on market supply and demand relation, but the U.S. should
be clear that it is a gradual process," he told Reuters.
"Currently, Chinese enterprises do not have the capacity to
hedge against currency risks and China also lacks an established
system to manage foreign exchange risks."
Beijing let the yuan CNY=CFXS rise 21 percent against the
dollar between July 2005 and July 2008 before effectively
repegging the currency near 6.83 to the dollar to help its
exporters surmount the global financial crisis.
The White House said on Tuesday that President Barack Obama
would raise the currency issue with President Hu Jintao on the
sidelines of a nuclear security summit in Washington next week.
Vice Foreign Minister Cui Tiankai, briefing reporters on the
summit, would not say whether Hu would discuss the yuan. But he
said Beijing did not want economic disputes to get out of hand.
"Of course between China and the United States, including in
the sphere of economics and trade and finance, there are
sometimes differing points of view. But above all, our two
countries have very important common interests in these
important areas that are constantly strengthening," said Cui.
Speculation that Beijing will let the yuan start climbing
before long has been fuelled by an easing of Sino-U.S. tensions
over the currency in recent days.
Geithner said at the weekend that he was delaying an April
15 report on whether China manipulates its currency. A finding
to that effect would have infuriated Beijing.
Speaking in India, Geithner said on Wednesday that the yuan
would take a broader international role, calling that a
"healthy, necessary adjustment". [ID:nBMA007297]
Washington and Beijing are trying to cool tensions after
U.S. arms sales to Taiwan and China's dispute with Google over
Internet freedom made for a rocky start to 2010.
But with U.S. unemployment stuck near 10 percent, Obama
faces pressure to get Beijing to let the yuan rise. Many U.S.
lawmakers say that by deliberately holding down the yuan, China
is giving its firms an unfair subsidy that costs jobs in many
The yuan rose slightly in the spot market on Wednesday,
reaching 6.825 to the dollar, its highest rate this year.
Offshore forwards were pricing in about 1.6 percent
appreciation over the next six months and 3.0 percent over the
next 12 months, slightly less than had been implied on Tuesday.
While Washington's delay of the currency manipulator report
may give Beijing the space needed to resume yuan appreciation,
most analysts think it will allow only a small rise, because it
remains worried about the solidity of the global recovery.
Trade figures due this Saturday are expected to show China's
first monthly deficit since April 2004. [ID:nTOE63501Z]
Although economists think a deficit would be an anomaly, it
could still give officials pause before sanctioning a rise in
The commerce ministry in particular has repeatedly demanded
that the yuan be kept stable until exports have recovered
strongly. The central bank, by contrast, would like a firmer
currency to ease inflationary pressure from a red-hot economy.
China should let market forces play a bigger role in setting
the level of the yuan, a professor at the Chinese central bank's
graduate school said in a magazine issued by the bank that
reached subscribers on Wednesday.
"This kind of reform will further stress the role of market
supply and demand in affecting the direction of the exchange
rate," Professor Wu Nianlu wrote in China Finance magazine.
(Additional reporting by Chris Buckley and Kevin Yao; Editing
by Alan Wheatley/Ruth Pitchford)