China is passive on dollar's level, PBOC

“It's like watching a tournament,” Zhou said at the BusinessWeek CEO Forum in Beijing Friday. “We just watch the game. Regardless who wins or loses, the issue of whether the winner or loser benefits the spectator doesn't arise.”

Zhou's comments came hours after a U.S. Congressional hearing where lawmakers charged China with preventing gains in its currency to provide a subsidy for exporters. Robert Mundell, a Nobel laureate in economics, said at the Beijing conference that the Federal Reserve's interest-rate cuts and a weakening dollar have helped secure China's economic recovery.

The level of the dollar is contingent on the global and U.S. economy, Zhou said Friday.

China has kept the yuan about 6.83 per dollar since July 2008 after allowing a 21 percent gain over the previous three years. U.S. Treasury Secretary Timothy Geithner said at the hearing in Washington that he's “quite confident” China will move to relax controls on the currency.

Concerns about the U.S. economy and rising government debt have pushed the trade-weighted Dollar Index down 7.2 percent this year. Federal Reserve Bank of Philadelphia President Charles Plosser Thursday said that the decline in the U.S. currency is a “reversal of the run-up after the panic” during the global financial and economic crisis.

Zhou also said Friday that Chinese policy makers are “flexible” about the need to maintain stimulus measures, indicating that decisions on the matter would be affected by the strength of economies abroad.

“There are signs of recovery, we will continue to maintain the moderately loose monetary policy and expansionary fiscal policy for a while,” Zhou said. “But we should also be flexible. We will monitor the economies of the U.S., EU, Japan and the emerging markets. We will have to monitor the pace of recovery in the world economy.”

Mundell, a Columbia University professor, said that global policy makers should be “very cautious about the effects of the exit policy” on the world's economy.

Any gains in the yuan may hamper a recovery in the global economy, a professor at China's Tongji University wrote in an article published Friday in the state-owned People's Daily newspaper.

Exchange rates in the world's major economies shouldn't be altered “abruptly” as the global recovery isn't “stable,” Shi Jianxun wrote in the international edition of the paper owned by China's Communist Party.

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