1 July 2005, 14:01  China seen holding the line on currency

No matter how much Scotch whisky flows at next week's G8 summit, Chinese President Hu Jintao is unlikely to let his guard down and reveal when Beijing might reform its currency regime. As Hu prepares for the meeting at the Gleneagles hotel in Scotland, financial markets and foreign officials are on edge trying to guess when China will finally adjust its decade-long policy of pegging the yuan to the dollar. Hu, analysts say, will almost certainly repeat the recent insistence of other top officials that foreigners are not in charge of China's economic policy. "They are going to send a message that their currency policy is going to be determined by domestic concerns and they aren't going to give in to bullying," said Arthur Kroeber, managing editor of the China Economic Quarterly. The G8's official schedule calls for discussion of climate change and African development, but China's currency and trade are expected to be hot topics on the sidelines and in one-on-one meetings between the world leaders. Countries such as the United States complain that the yuan's current level of about 8.28 to the dollar is artificially low and makes Chinese exports unfairly cheap on world markets. Beijing has repeatedly said it is committed to making the yuan more flexible over time but must do so without jeopardizing its economic growth and social stability. The G8 is composed of the Group of Seven industrialized nations -- Britain, Canada, France, Germany, Italy, Japan and the United States -- plus Russia. This year's meeting also includes a "plus five" group of Brazil, China, India, Mexico and South Africa. As many countries struggle to cope with China's dramatic rise from an impoverished backwater to the world's seventh-biggest economy, Hu will also want to convey that Beijing is well aware of what its new status entails.

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