European finance officials on Sunday acknowledged the timing of China's exchange rate reform should be upon the country's own decision. They did not press the yuan to appreciate in a hurry.
The officials who are here attending the Sixth ASEM Finance Ministers' Meeting actually echoed the remarks of Chinese Premier Wen Jiabao, who told the meeting Sunday morning that it is the "common understanding" around the world that every country is entitled to choose the exchange rate mechanism and policy suitable to its own national conditions.
At first blush, this appears consistent with the direction taken by U.S. Treasury Secretary John Snow's comments last week...
U.S. Treasury Secretary John Snow said on Thursday he believes China is ready to move to a more flexible exchange rate right away, but warned Congress steps to pressure Beijing through sanctions would backfire.
... but the "right away" versus "not... in a hurry" distinction is an important one. Snow went on:
At the same time, the treasury secretary called China's policy of pegging its currency, the yuan, to the dollar "highly distortionary" and said it poses risks for China and its neighbors.
He told lawmakers that failure by Beijing to make "substantial alteration" to its currency policies would likely lead to China's designation as a currency manipulator under U.S. law, which in turn would lead to the possibility of sanctions.
"China is now ready and should move without delay in a manner and magnitude that is sufficiently reflective of underlying market conditions," Snow said.
I suppose it remains to be seen if this is consistent with what the Chinese government has in mind. Again from the China Daily report:
Vowing to keep the yuan "basically stable," China does not mean its currency will not float at all. On Sunday, Premier Wen Jiabao reiterated that China must uphold the principles of "independent initiative, controllability and gradual progress" in pursuing RMB exchange rate reform...
"By 'independent initiative,' we mean to independently determine the modality, content and timing of the reform in accordance with China's needs for reform and development," said the premier...
"By 'controllability,' we mean to properly manage the changes in RMB exchange rate at the level of macro-regulations. We must push forward the reform but always stay on top of the challenges, so as to prevent fluctuations in the financial market and economic instability," the premier said.
"By 'gradual progress,' we mean to push forward the reform in a step-by-step manner. We must take into consideration both the present needs and future development and guard against undue haste."
Whatever the tensions this might present relative to the American point of view, the European finance ministers said no problem:
... it is up to China to decide the timing (of exchange rate reform) and we are waiting," [Deputy Finance Minister Caio K. Koch-Weser of Germany] said...
RT Hon Des Browne, chief secretary to the British Treasury, said he was "pleased" by what the Chinese premier said, adding, "We will continue to be supportive of China's ambition in this regard."
"It is very important and very good that Chinese leaders paid great attention to this matter (currency reform) and I'm sure this matter will develop in time," Rastislav Sulla, counselor/head of the trade and economic department, the Slovakian Embassy to China,told Xinhua.
Polish Finance Minister Miroslaw Gronicki said, "I like the gradual approach to solve the issue. I mean, any movements on currency may have effects not only on the Chinese economy, but on the Asian economy."
What China is doing -- moving gradually to liberalize the exchange rate -- is a "right thing," the minister said.
"I don't mean in a near time, but in five- to ten-year time, the Chinese economy will need a different currency regime to adjust it to the developing economy and at this moment, I think any rush will not do good."
UPDATE: See also Tyler Cowen's post regarding Niall Ferguson's thoughts on the subject.