The Chinese ministry responsible for promoting exports has backed a further appreciation of the renminbi, removing one of the last remaining institutional lobbiesin Beijing against a stronger currency.
A think-tank attached to the commerce ministry said that an “appropriate or modest” appreciation of the renminbi would benefit China’s economy and trade “in the long run”.
“In the near term, a 3 per cent appreciation of the renminbi every year will not have an obvious or apparent influence on the overall increase of China’s trade,” said the report, which was posted on the ministry’s website.
The ministry said previously a 3 per cent appreciation would wipe out the profits of many exporters because of the razor-thin margins under which businesses operate. However, the ministry’s position has become increasingly untenable, with the trade surplus soaring during the past 18 months, a period in which the renminbi appreciated by more than 6 per cent against the US dollar.
The commerce ministry’s new position is unlikely to have any impact on currency policy, which is controlled by the People’s Bank of China, the central bank.
Its position is also in line with the central government’s own economic plan, which favours lifting domestic consumption to reduce reliance on exports for economic growth.
However, taken with a statement on Monday by Bo Xilai, China’s commerce minister, about the need to reduce the swelling trade surplus, the report is a sign of a more urgent appreciation of the issue across the government.
China’s global trade surplus reached $177.47bn in 2006, up 77 per cent year-on-year, and is expected by most local and foreign analysts to exceed $200bn this calendar year.