Chinese Prime Minister Wen Jiabao has rejected pressure for exchange rate reforms and criticized the United States for not doing its part to keep the dollar from weakening. Washington has been calling on China to adopt a flexible exchange rate system to ease pressure on the dollar and reduce the U.S. trade deficit.
Prime Minister Wen Jiabao said economic stability is China's top consideration, and this will be given priority over a change in the value of the Chinese currency.
Mr. Wen said changes to the exchange rate must meet certain conditions, such as a stable economic environment and a healthy financial system. He added that China must consider the impact that floating the currency would have on the region and the world.
Zhao Zhichao, who studies the Chinese financial system at Durham University in Britain, agrees that a revaluation of the currency should be considered carefully. "If China rushes into a currency revaluation," he said, "that would cause huge swings in the Chinese economy, and that perhaps is not good for other economies either."
The value of the Chinese currency, the renminbi or yuan, has been fixed at around 8.28 to $1.00 (U.S.) for the past 10 years.
The United States says this is lower than the real value, making Chinese exports artificially cheap and hurting American businesses. It wants China to adopt a market-determined exchange rate for the yuan.
Some economists, however, say a yuan revaluation is not the answer to the dollar's problems. They say the United States needs to show it is taking measures to curtail its overspending.
Prime Minister Wen, attending the annual Association of Southeast Asian Nations summit in Laos, criticized the United States for not taking measures to deal with the dollar's continued weakness. The dollar has been losing value against major currencies in recent weeks, on concerns of record U.S. trade and budget deficits.
Other Asian nations fear the dollar's continued weakness will slow economic growth, because a weak dollar makes their products more expensive in the United States.
The Bush administration says it is committed to a stronger dollar, and aims to cut the huge U.S. budget deficit in half over the next four years.