U.S. Federal Reserve chairman Alan Greenspan says China may move soon to make its currency, the yuan, more flexible. China, however, is standing firm saying it will not be pressured into removing its current peg.
U.S. central bank chairman Greenspan took part in a panel of central bankers who gathered in Beijing Tuesday. Speaking from Washington via video-link, he said he expects China to make its currency - now fixed at a rate of about 8.20 RMB to the dollar - more flexible in the near future.
"The issue of allowing flexibility in some form in the RMB, strikes me as very much to the advantage of China and indeed it's something that I am certain they will take on reasonably soon," said Mr. Greenspan.
Sitting on the panel Tuesday was Chinese central bank Governor Zhou Xiaochuan, who repeated China's position that it will not bow to outside pressure. He said China will take its time to make any changes. "Right now, if there is too much expectation on the role of the RMB, I think probably it's too heavy on our shoulders and I think it's not so good at this moment to try that," he said.
The official said China has much work to do in reforming its banking institutions so that they can be ready to handle the pressures that would be created by a floating currency.
Some politicians and labor groups in the United States want Washington to pressure China to allow its currency to float freely. They allege the current peg makes Chinese imports artificially cheap, causing the United States to lose jobs.
However, Mr. Greenspan told panelists that while an adjustment of the Chinese currency would bring a drop in Chinese exports to the United States, it would not cause the giant U.S.-China trade deficit to shrink very much, if at all.
Central bankers from Europe and Japan at the conference also expressed their support for making the yuan more flexible.