China rejects pressure to reform yuan

Premier Wen Jiabao today staked out a tough line on reform of the yuan's fixed exchange rate, saying the issue was a "sovereign…

Premier Wen Jiabao today staked out a tough line on reform of the yuan's fixed exchange rate, saying the issue was a "sovereign" affair for China and that politicising economic issues would not help.

Wen's remarks were relayed by the official Xinhua news agency and follow intense pressure by the United States in particular to get Beijing to scrap the currency's long-standing peg of 8.28 per dollar.

China consumer inflation slowed to 1.8 per cent in the year through April from 2.7 per cent in March in what was the lowest rate in 19 months.

A high base of comparison in 2004, a stabilisation of food prices and companies' willingness to cut profit margins rather than lose market share are keeping a lid on consumer inflation despite rising wages and high prices for inputs such as oil, economists say.

READ MORE

Easing inflation is seen a boon to Beijing, under heightened foreign pressure to revalue the yuan.

"The number is pretty good, showing inflationary pressure is under control," said Zhuang Jian, economist at Asian Development Bank in Beijing. "Expectations of a rate rise will decline and the central bank will find it easier to cope with inflation."

Consumer price inflation in the year through April was the lowest since September 2003, when prices were 1.1 per cent higher than a year earlier.