China ministry withdraws report on rising yuan

BEIJING, Jan 17 (Reuters) China's Ministry of Commerce has withdrawn a research report that said the yuan is undervalued and is likely to rise 3-4 percent by the end of 2007, officials said.

The ministry published the two-part study by its think-tank on the front page of its Web site on Monday and Tuesday.

The ministry retracted the report on Wednesday after a number of domestic and foreign media outlets interpreted it as an official endorsement of a stronger exchange rate.

The lengthy paper examined the outlook for the yuan's exchange rate and the impact it might have on China's industry, trade and investment. Dealers cited the study as a reason why the yuan closed higher on Monday and Tuesday.

''There is certainly an over-reading of the report in the market, and the leadership of the ministry would not like that,'' said Mei Xinyu, a researcher with the ministry's think tank, the Chinese Academy of International Trade and Economic Cooperation.

Mei, one of the researchers behind the study, added: ''It is a research report and not an official statement.'' He said the paper was actually completed months ago.

''How can you expect the government to tell you how much the exchange rate of its currency will move?'' he asked.

An official with the Ministry of Commerce's news division declined to comment, saying the department did not manage the content of the Web site.

The report cannot be found through the original front-page link, but the first part was still posted on Wednesday, apparently inadvertently, at http://ww.mofcom.gov.cn/article/difang/yunnan/ 200701/20070104274998.html.

REUTERS PV DS1304