BEIJING, May 12: China’s central bank said on Thursday it would not bow to external pressures to revalue its currency and blamed the United States for creating a negative environment for any eventual loosening of the yuan peg. The comments by People’s Bank of China (PBOC) vice governor Wu Xiaoling came a day after billions of dollars of speculative money was let loose on forex markets worldwide after confused reports that China would revalue the currency on May 18.

“Originally there was a pretty good environment (for reform),” Wu said. “It is not proper to say that the reform direction of the Chinese government is being carried out under pressures from outside.” She especially targeted pending legislation in the US Congress which threatens to impose a 27.5 per cent tariff across the board on Chinese imports if Beijing does not loosen the peg within six months.

This pressure has resulted in rampant speculation that currency reform could come sooner rather than later, prompting a flood of hot money into Chinese assets, especially property, in expectation of a yuan appreciation, Wu said. It has also hamstrung the government’s macro-reform policy, especially as it tries to cool down an overheated economy.

“We are making efforts in our work (to reform the forex regime) but we never thought that in the first quarter of this year that they (the US Congress) would put out such a plan,” Wu said.

The PBOC said Wu’s comments were made to Japanese media on April 27 but they only appeared on the bank website Thursday after forex markets went wild Wednesday following the reports of an imminent revaluation.

The central bank forcefully rejected those reports but the damage had been done before the markets finally calmed down. Thursday’s posting on the bank’s website notably did not include Wu’s references to the bank being “technically” ready for currency reform that ran prominently in the Japanese media.

China has fixed its yuan currency in a narrow band at around 8.28 to the dollar for the past decade, angering major trading partners who argue that it gives Chinese exports an unfair advantage. Regarding China’s 16.6 billion dollar trade surplus with the United States in the first quarter, Wu said it was not what Beijing wanted to see.—AFP