HONG KONG: Hong Kong's leader Donald Tsang has said a looming global recession could prompt China to slow its currency's rise against the dollar on fears about slumping trade, a report said Thursday.
Critics, led by the US, have accused China of keeping the yuan's value artificially low to boost exports, and have called on Beijing to let the currency appreciate faster against the greenback.
The yuan has strengthened about seven percent against the dollar since June 2010 when Beijing vowed to let the currency trade more freely, although critics say it is undervalued by about 30 percent.
But a decline in global trade may see Beijing change course on its policy to let the yuan, also known as the renminbi, continue strengthening against the dollar, Tsang told The Wall Street Journal.
"I think, maybe the renminbi at the present trade pattern has reached a more optimal level," Tsang was quoted as saying in remarks published Thursday.
"(China is) engineering the appreciation of the renminbi in relation to the trade portfolio without causing any serious rupture in the domestic economy."
Hong Kong's chief executive added that "I'm afraid all the ingredients for another slowdown in the global economy are coming."
"The lack of investor confidence and the slowdown of consumption both in Europe and America are not good signs," he said.
The semi-autonomous Chinese territory is acting as a test bed for the internationalisation of the yuan, a key part of Beijing's goal to turn the unit into a global currency rivaling the dollar.
Beijing approved the yuan's use to settle cross-border trade with Hong Kong in 2009.
Tsang also said the amount of yuan-denominated trade will continue to grow due to uncertainties over the volatility of the dollar and euro, but added that full convertibility in the yuan won't happen in the near future.
"We are not talking about months, we are not talking about years, we are talking about decades," he said.
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