Beijing, Sept 05: China, under persistent US pressure to revalue the yuan, plans further steps to ease capital controls to help take the heat off the currency, a senior government official was quoted as saying.
"We will continue to take a series of positive measures to loosen, appropriately, control on enterprises keeping their foreign currency," the Xinhua news agency quoted a senior official at the State Administration of Foreign Exchange as saying.


China and the United States agreed on Wednesday during a visit by US Treasury Secretary John Snow that the yuan should eventually float freely, but Beijing insisted it would not be bullied into acting too fast for fear of worsening unemployment.


US President George W Bush said on Thursday that China's currency policy, a key issue ahead of the 2004 presidential election, was unfair and Washington would "deal with it accordingly" following the talks in Beijing.



Snow carried to China complaints from US manufacturers that the yuan was too cheap at its current level, giving Chinese exporters an unfair advantage that was costing US jobs.



China would also "enlarge the sphere of forex supply and address earnestly the demand for rational use of foreign currency from enterprises and individuals", an overnight Xinhua report quoted the unnamed official as saying.

The government would encourage imports to spur industrial upgrading and help reduce China's trade surplus and slow growth of its hefty foreign exchange reserves, Xinhua said.


Bush, in an interview with CNBC, said Snow used meetings in Beijing to "deliver a strong message from the administration that we expect our trading partners to treat our people fairly -- our producers and workers and farmers and manufacturers -- and we don't think we're being treated fairly when a currency is controlled by the government".



Administration officials are considering how to step up pressure on Beijing.



Bush could raise the currency issue directly with Chinese President Hu Jintao. They are expected to meet on the sidelines of an economic summit in Thailand in October.


"I personally believe the renminbi (yuan) is unlikely to appreciate by a big margin, no matter in the near term or in the long term," Wei Jianing, an economist with the Chinese cabinet's Development Research Centre, told the official Financial News.


But Yu Yongding at the Chinese Academy of Social Sciences told the newspaper that China should consider a small appreciation of the currency to show "it is a responsible big country which fully considers other countries' interests".

Stanford University Professor Ronald McKinnon said on Thursday that China should disregard outside pressure and keep its currency fixed to the dollar to escape the kind of domestic deflationary spiral Japan got sucked into.



Beijing has announced plans to raise the limit on the amount of foreign exchange travellers can buy from banks from next month to help ease upward pressure on the yuan.



China has already relaxed foreign-exchange curbs, including allowing some service firms to retain more forex earnings, and made it much easier for multinationals to deal in hard currency.



"The Chinese government will not likely allow its currency to appreciate by a fairly big margin, and instead is seeking to alleviate mounting pressure from overseas," Xinhua said.


Analysts say China's move to allow more foreign exchange outflows is based on domestic needs to contain monetary and unemployment risks rather than a bid to mollify the United States. Bureau Report