China to cut exports, boost consumption and relax exchange controls

BEIJING, June 22, 2007 (AFP) – A rise in the value of China’s currency will not in itself be enough to narrow the nation’s yawning trade surplus, a senior central bank official was quoted as saying in state media Friday. The licence scheme, know as qualified domestic institutional investors (QDII), has so far been restricted to banks and insurers. “China’s export-oriented economy is a structural problem which cannot be fixed merely by changing its exchange rate,” said Wu Xiaoling, deputy governor of the People’s Bank of China, according to the China Daily.

She made the remarks at a forum in Beijing after US Treasury Secretary Henry Paulson said on Wednesday that China’s pace of reform was too slow and the yuan was still undervalued.

“A country’s financial sector should open in a way commensurate with its financial system,” said Wu. “Opening without due management will threaten financial stability.”

She said China has taken a series of financial and tax measures to curb export growth and increase domestic consumption.

The government would also continue to relax controls on the capital account to allow more outflows to reduce excess liquidity in the banking system, she said.

The finance ministry on