YUAN CURRENCY STABILITY TOP PRIORITY, SAYS ZHOU

       Zhou Xiaochuan, governor of the Chinese central bank, has said currency stability is the most important goal of monetary policy as exporters call on the government to delay appreciation of the yuan.
       China must stick to a moderately loose monetary stance, use policy tools flexibly and control inflation to keep the yuan stable, Zhou said in an interview transcript posted on state radio's website yesterday.
       China has stalled the yuan's gains against the dollar since July last year, protecting exporters as stimulus spending drives the recovery in the world's third-biggest economy. Exporters at a trade show in Shanghai yesterday urged the government to delay gains by the currency after overseas shipments slumped 23.4 per cent in August from a year earlier.
       "The yuan's exchange rate should be kept stable," said Bruce Shao, general manager at Jiangsu-based Taicang Tianchen Tracery, a manufacturer of bamboo curtains. "I don't know when we can fully recover," he said, citing a 20-per-cent decline in sales this year.
       Monetary policy needs to be contnuously adjusted in relation to the nation's economic development, employment, currency stability and the international balance of payments, Zhou said.
       Developing natins such as China can accept inflation of more than 2 per cent, a higher rate than developed countries generally hope for, he added.
       China's consumer prices have fallen for the past seven months after inflation rose in February 2008 to an 11-year high of 8.7 per cent.
       The yuan traded at 6.8259 per dollar as of 2.31pm in Shanghai, from 6.8269 the previous day. It strengthened 21 per cent in the three years after a peg against the dollar was scrapped in July 2005. The currency will end this year at 6.82, and rise 2.2 per cent to 6.68 by the end of 2010, according to the median estmate in a Bloomberg News survey of 27 analysts.
       Since 2005, the flexibility of the yuan's exchange rate has increased notably, Zhou said. The currency has been kept basically stable, he added.
       Commerce Minister Chen Deming said in July that exports would decline at a slower pace in the second half of the year, while reiterating that a stable exchange rate is important for an economic recovery.
       Exporter Shao said he waited in his booth for more than five hours at the International Sourcing Fair yesterday without a single foreign buyer visiting.

       "Monetary policy needs to be continuously adjusted in relation to the nation's economic development, employment, currency stability and the international balance of payments. Developing nations such as China can accept inflation of more than 2 per cent, a higher rate than developed countries generally hope for."