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CORRECTED-China min sees limited yuan flexibility possible

Published 01/08/2010, 09:33 AM
Updated 01/08/2010, 09:36 AM

(Corrects headline, first and fourth paragraphs to remove link between possible yuan flexibility and dollar appreciation)

ISTANBUL, Jan 8 (Reuters) - China's commerce minister Chen Deming said on Friday there may be some flexibility in the yuan, but that China would continue working to preserve the stability of its currency against the dollar.

"Yesterday, the yuan stood at 6.82 against the dollar. That is, it appreciated very slightly. We will work to preserve this stability," said Chen in words translated from Chinese into Turkish.

Beijing has effectively re-pegged the yuan at near 6.83 to the dollar since its exports dropped sharply with the worsening of the global financial crisis in mid-2008.

"Of course, it does not necessarily have to stay unchanged. Modifications and flexibility are possible. But no matter what happens, the yuan and dollar must preserve their value," Chen said.

He did not elaborate on possible modifications or when they might take place.

A sustained recovery in exports, which have still been declining in year-on-year terms, is seen as a key precondition for Beijing to let the yuan resume the gradual path of appreciation that it followed from mid-2005 to mid-2008, when it rose about 21 percent.

A series of foreign leaders, including U.S. President Barack Obama and European Commission President Jose Manuel Barroso, have visited China in recent months to press for an appreciation of the yuan.

But China has been increasingly defiant in rebuffing their calls. Chinese Premier Wen Jiabao said last moth that foreign demands for a stronger yuan were tantamount to attempts to curb Chinese growth.

"The dollar has appreciated for a short while. Our view is that the dollar's value may preserve its stability in the new year. What is happening is a temporary move. This may not be the case in the long term," Chen said. (Reporting by Melis Senerdem; Editing by Andrew Torchia)

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