“There is no new strategy on the exchange rate,” Zhou said. ”It is the same as before — the exchange rate will be determined by market supply and demand against a basket of currencies. It will be kept stable at an appropriate, balanced level.”
The statement was in reply to some politicians and commentators in the West who said that the « super-abundant savings from fast-growing emerging nations » are responsible for the global economic imbalance and their suggestion that the yuan be allowed to appreciate faster to cut China’s foreign exchange reserves.
Zhou Xiaochuan added that China will not be able to reduce its savings rate quickly because of a number of complex factors.
« A number of complex factors account for the high savings rate of East Asian economies, including China, and changes in the exchange rate policy would not necessarily reduce it, » Zhou said at a forum in Kuala Lumpur.
« The exchange rate has something to do with the savings rate, but statistically speaking, their relationship is vague. We cannot adjust the savings rate simply by changing the exchange rate, » he said.
« People may think the exchange rate and interest rate are deciding the relationship between savings and consumption, but in reality things are much more complicated, » Zhou said.
Zhou said that people in East Asia tend to save more due to various factors like special traditions, cultural differences, family structure and demographic features of East Asian economies.
Many East Asian countries have a savings rate of about 40 percent against their GDP while that in the US and UK is less than 20 percent.
The history of the countries that suffered from the 1997 Asian financial crisis has also prompted them to pile up foreign exchange reserves as a tool to prevent reoccurrence of the financial crises, Zhou said.
Zhou pointed out that although China has made relentless efforts to cut its savings rate, further interest reduction will not work in the short term because it is the result of deep-rooted social and cultural factors, he added.
Instead, Zhou called for reforming the international currency regime in the long term, making it more diversified and less dependent on the US dollar.
Source : Konaxis
