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China c.bank says again will stick to stable policy

Written by: Staff
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BEIJING, Mar 23 (Reuters) China's central bank reiterated a long-standing policy on Thursday of keeping its yuan exchange rate basically stable, while pushing ahead with plans to allow for further flexibility.

The policy statement was released as two U.S. senators pressing Beijing to loosen currency controls continued a five-day fact-finding visit to China.

In a brief statement on its Web site (www.pbc.gov.cn), the People's Bank of China said it would continue to pursue a stable monetary policy and seek basic balance in its international payments.

International political pressure on China's currency policy has been mounting despite Beijing's 2.1 per cent revaluation of the yuan last July and a 1 per cent rise since then.

U.S. advocates for further yuan appreciation argue that the currency is still undervalued, giving Chinese products an unfair advantage in export markets and costing the U.S. economy jobs.

On Wednesday, the State Council, China's cabinet, issued a circular urging the central bank to keep the yuan stable as one of a long list of national priorities for this year.

The central bank statement, following a meeting to discuss the first quarter, said China's financial system was operating soundly and its new foreign exchange rate regime was running smoothly.

SENATORS China would ''further perfect its exchange rate regime, expand its foreign exchange market and improve the flexibility of its exchange rate'', it said.

The central bank would keep the yuan ''basically stable at a reasonable and balanced level'', it said.

It would also fine-tune monetary policy to ensure that the country continued to grow at a rapid pace and that prices remained stable, it said.

China would seek to actively expand domestic consumption while ensuring that fixed-asset investment was kept at appropriate levels, it said. The country's structures for investment and trade would be perfected.

Further efforts would be made to build a sound financial system and expand direct financing channels, it added.

The statement generally repeated long-standing policy.

The visit by the two U.S. senators was unlikely to resolve the yuan issue, a state-run newspaper said on Thursday, urging a steady-as-she-goes approach to foreign exchange reform.

Charles Schumer, a New York Democrat, and Lindsey Graham, a South Carolina Republican, are authors of a bill that threatens China with a 27.5 per cent tariff on exports to the United States unless Beijing allows the yuan to strengthen significantly against the dollar.

''It is unlikely that the differences will be settled during the visit of the two senators,'' the China Daily said in an editorial.

REUTERS SD PM1645

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