VZCZCXRO7328
PP RUEHCN RUEHGH
DE RUEHBJ #0311/01 0360959
ZNR UUUUU ZZH
P 050959Z FEB 10
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC PRIORITY 7973
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHDC
INFO RUEHOO/CHINA POSTS COLLECTIVE
RHEHNSC/NSC WASHDC

UNCLAS SECTION 01 OF 02 BEIJING 000311 
 
SIPDIS 
SENSITIVE 
 
STATE FOR E, EAP/CM, EEB/OMA 
TREASURY FOR OASIA/DOHNER, WINSHIP 
NSC FOR LOI 
 
E.O. 12958: N/A 
TAGS: ECON EINV EFIN CH
SUBJECT: China/RMB: Patience and Stbility 
 
REF: BEIJING 147 
 
¶1. (SBU) Summary.  Senior Chinese officials continue 
to signal publicly that China's currency is pegged at 
a basically "reasonable level."  In a meeting with the 
Ambassador today, Central Economic and Financial Leading 
Group Vice Minister Liu He urged patience on the exchange 
rate issue, noted that the Renminbi "had to" appreciate, 
but at a "controlled pace," but added that outside 
pressure was "not helpful."  Earlier in the week in 
Davos, Senior Vice Premier Li Keqiang argued that 
the stable Renminbi, by supporting Chinese demand, 
had in turn supported global recovery and called the 
exchange rate "reasonable and balanced," a position 
reiterated by the Ministry of Foreign Affairs (MFA) 
spokesperson a few days later.  A People's Bank of 
China (PBOC) Deputy Governor, also in Davos, 
explained that China would look at revaluing its 
currency when global partners begin to withdraw 
their stimulus packages.  A forceful lead article 
today in the English-language China Daily asserted 
that China would not "fold" to foreign pressure on 
the currency issue, but a quasi-official economist 
published an article speculating that China could 
appreciate the Renminbi in March.  End Summary. 
 
Liu He: Patience 
---------------- 
 
¶2. (SBU) Central Economic and Financial Leading 
Group Vice Minister Liu He told the Ambassador today 
that dealing with the Renminbi would be as tough as 
any issue on the bilateral agenda.  He said he 
understood that the United States had upcoming 
elections, high unemployment and monetary pressure 
to manage.  China, however, could not forgo exports 
too quickly and also was worried about employment, 
making currency a political issue for Beijing as 
well.  For economic reasons, Liu stated that the 
Renminbi "had to" appreciate, but at a "controlled 
pace."  Outside pressure was not helpful; Liu 
recommended the Secretary Geithner maintain his 
current approach to the issue.  He asked for 
patience on the U.S. side while China awaited an 
opportune time to proceed, suggesting that the U.S. 
and China look for other opportunities to 
demonstrate that the relationship could create jobs 
in America and investment returns for China. 
 
Li Keqiang: Stable RMB "Positive" 
--------------------------------- 
 
¶3. (SBU) Vice Premier Li Keqiang did not address the 
sensitive issue of exchange rates directly during 
his January 28 speech at the World Economic Forum in 
Davos, Switzerland.  During a discussion with 
corporate executives, however, Li asserted that 
China will maintain the exchange rate at its current 
level.  Restating the standard Chinese points, Li 
said "China is consistent and responsible with its 
RMB exchange rate policy.  We will--according to the 
principles of pro-activity, controllability and 
incrementality--perfect the RMB exchange rate 
formation mechanism to maintain it at a reasonable 
and balanced level."  Li asserted that China's 
policy of stabilizing the Renminbi at a "rational 
and balanced level" contributed positively to the 
global economy.  He explained that China's economic 
and financial stability could not be separated from 
RMB stability, and Chinese domestic demand played a 
positive role in global economic stabilization and 
recovery.  Li's points were echoed in a February 23 
editorial in the official Chinese-language Renmin 
Ribao (People's Daily) asserting that China's 
Renminbi policy had helped the global economy and 
the call for appreciating was merely a "political 
bargaining chip." 
 
Zhu Min: When Others Exit 
------------------------- 
 
¶4. (SBU) Also at Davos, People's Bank of China 
(PBOC) Deputy Governor Zhu Min said the stable 
exchange rate had been "a stimulus package" and 
China would look at revaluing its currency when 
 
BEIJING 00000311  002 OF 002 
 
 
global partners begin to withdraw their stimulus 
packages.  Sounding a similar note to Li, Zhu said 
the move was "good for China and also good for the 
world."  "If global (partners are) ready to do exit 
strategy, China is ready ... including various 
issues -- liquidity issue, exchange issue."  He 
further warned that revaluation of the Renminbi 
would not in itself resolve global trade imbalances, 
stating "exchange rate is an issue within this 
rebalancing issue." 
 
MFA: Reasonable Level 
--------------------- 
 
¶5. (SBU) Chinese Foreign Ministry spokesman Ma 
Zhaoxu---responding on February 4 to a question from 
the media about President Obama's comments to Senate 
Democrats-reiterated that Chinese point that 
exchange controls are not to blame for China's trade 
surplus.  He stated that "China does not seek a 
trade surplus with the US" and the Renminbi's 
exchange rate against the dollar was largely at a 
reasonable level.  Accusations and pressure did not 
help to solve the problem, Mr. Ma added. 
 
China Daily: China Won't Fold 
----------------------------- 
 
¶6. (SBU) The official English-language China Daily 
ran a front page, above-the-fold article headlined 
"China Won't Fold on RMB: hasty appreciation of the 
yuan will be detrimental to China's economy."  The 
article quoted Ministry of Commerce-affiliated 
economist Li Jian stating "China will not 
(appreciate) in accordance with the US' demand." He 
claimed the yuan will be "largely" stable this year, 
without a sudden or quick revaluation. 
 
CASS Zhang Ming:  Time to Appreciate Coming 
-------------------------------- 
 
¶7. (SBU) There are still dissenting voices on RMB 
appreciation within the official academic community 
in Beijing.  China Academy of Social Sciences (CASS) 
World Economic and Political Research Institute vice 
director Zhang Ming wrote today in the Chinese- 
language "Hexun" financial news service that the 
timing for Renminbi appreciation might move up as 
China faces the possibility of overheating in the 
first quarter.  Zhang thought the government might 
choose to address inflationary pressures by moving 
the exchange rate, bringing down the cost of 
imported commodities.  To prevent anticipatory 
speculative inflows, Zhang guessed that Beijing 
might appreciate earlier than expected, around March 
National People's Congress meetings. 
 
HUNTSMAN