US moves to stop China pegging currency to US dollar

1. Wide shot of officials entering room
2. Cameraman at news conference
3. Journalist asking question
4. SOUNDBITE (English) John B. Taylor, U.S. Treasury Undersecretary
“The flexible exchange rate is, as we’ve learned here, something that can actually help with stability in China, help prevent the overheating and those are all good things that can help with a non-performing loan problem as well.”
5. Journalists
6. SOUNDBITE (English) John B. Taylor, U.S. Treasury Undersecretary
“The Chinese government has indicated previously to us that the move to a flexible exchange rate is one that they’re moving ahead with and so on that basis we had good, candid discussions about how that might occur, what the timing might be and in particular how a move to a flexible exchange rate may interact with the rest of the world economy because it’s so important for the growth of the world economy, the growth of China, the growth of Asia, for China to move towards a flexible exchange rate.”
7. Journalists at news conference
8. Taylor at lectern
9. SOUNDBITE (English) John B. Taylor, U.S. Treasury Undersecretary
“I don’t see any negative impact on the U.S. economy. It’s basically, what we have emphasised and what many of the other governments have emphasised is that the flexibility of the exchange rate in China is something that would help stability and we have talked not so much about whether it should happen but the mechanisms that need to be put in place.”
10. Reporters taking notes
11. Wide shot of Taylor and Ambassador Paul Spelt, the U.S. special envoy to Beijing on financial and foreign exchange issues
12. Mid shot of Taylor and Spelt at lectern
13. Journalists seated at news conference
14. SOUNDBITE (English) John B. Taylor, U.S. Treasury Undersecretary:
“Almost all discussions of the world economy these days involve China. China is a major economy in the world stage and so the more interactions that policymakers in other countries can have with policymakers in China the better. My visit here, Ambassador Spelt’s appointment, is indicative of that and I expect that more and more will occur.”
15. News conference ending

STORYLINE:

A shift by China to a more flexible foreign exchange regime would help policymakers address the country’s overheated economy, U.S. Treasury Undersecretary John B. Taylor said on Tuesday.

Speaking at the end of a three-day visit to Beijing, Taylor said that notwithstanding progress on the foreign exchange issue, he was confident China is taking steps to address concerns about the economy growing too quickly.

Taylor also said no agreement has been reached within China on the type of flexible currency regime to be pursued.

China has a managed float that keeps the yuan’s foreign exchange rate effectively pegged to the dollar.

With the dollar’s value sliding in 2003, speculative capital has roared into China in expectation of an upward revaluation of the yuan, and this flood of cash has helped to finance the increased investment that is threatening to overheat the economy.

Though he was given no guarantees of yuan revaluation or a shift to a new regime, Taylor hinted that debate within China is still continuing about the best way to move ahead.

The undersecretary also allayed fears that a flexible exchange rate would have a negative impact on the U.S. economy, saying that such a move would help stability.

Also on Tuesday, the United States appointed Paul Spelt to be its special envoy to Beijing on financial and foreign exchange issues.

Spelt said he would continue talks with China as long as it was necessary.

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