China remains on course to gradually put in place a managed floating exchange rate system, President Hu Jintao said in a speech released on Friday amid pressure on Beijing to let its yuan currency strengthen.
We have always moved toward implementing a managed floating exchange rate system based on principles of acting on our own initiative in a controlled and gradual manner, Hu said, according to a transcript of the speech, made to a closed-door session of a summit of emerging economies.
He was reiterating Beijing's longstanding official description of China's yuan policy, in a section of the speech about the country's achievements since the financial crisis.
Hu also made the case that China was a responsible developing economy, arguing that the yuan's stability since the outbreak of the credit crunch had contributed to global financial stability.
After the international financial crisis, we were confronting great difficulties, so maintaining a basically stable renminbi exchange rate helped promote global financial stability, Hu added.
China's leaders have said they want to ensure that exports have made a sustained recovery before unwinding anti-crisis policies, including a freeze of the yuan's exchange rate against the dollar imposed in July 2008.
In 2005, China made a one-off revaluation of 2.1 percent, then adopted what in practice was a crawling peg against the dollar, allowing the yuan to rise a further 19 percent before putting it on ice at about 6.38 per dollar.
China in March recorded its first monthly trade deficit in six years, but a customs official called the shortfall a blip reflecting strong imports of oil, raw materials and cars. But economists doubted it would stand in the way of a resumption in the yuan's rise before long.
Eventually China will allow a revaluation but it will do so gradually, it doesn't want to take risks, said Stuart Bennet, currency strategist at Calyon in London.
Hu made the speech on Thursday at a summit in the Brazilian capital of leaders of Brazil, Russia, India and China -- the so-called BRIC countries. China's Foreign Ministry posted a copy of the speech on its website (http://www.fmprc.gov.cn) on Friday.
International pressure on China to scrap the yuan's peg has been strongest from Washington, which says Beijing keeps the yuan deliberately undervalued to help Chinese exports.
Officials from developing countries, including some attending the BRIC summit, have also expressed concern about the yuan in recent weeks. Brazil's finance minister said last week a stronger yuan would be good for the global economy.
But the yuan was off the agenda at the meeting, as the other three emerging economies did not wish to risk fraying ties with Beijing over the issue while trying to build consensus on less controversial economic areas.
Economists said Hu's comment seemed in line with China's approach to foreign exchange policy.
I'd say this is what they've always said and it doesn't sound like this is anything we don't already know, said Mark Chandler, senior currency strategy at Brown Brothers Harriman in New York. We still don't know when it will begin. There's just a lot of speculation now.