Banking

Finance ministers from China, Japan and South Korea said in a joint statement Wednesday they have agreed to start studying the use of their own currencies in trade settlement, the latest sign of Asian efforts to reduce dependence on the U.S. dollar.

The ministers from the three big Asian economies also said they are "mindful of" challenges such as growing inflationary pressures in Asia, rising global commodity prices and increasingly volatile capital flows into the region.

The yuan was little changed against the dollar on Wednesday as the Chinese and U.S. administrations reiterated their positions regarding the value of the two countries' currencies ahead of their top-level talks in Washington next week.

In a quarterly monetary policy report late on Tuesday, the People's Bank of China reaffirmed that the government will keep the yuan's exchange rate basically stable - a phrase that implies yuan appreciation against the dollar will be gradual and controlled in line with China's economic conditions.

U.S. Treasury Secretary Timothy Geithner said on Tuesday that China is starting to let the yuan rise more rapidly to curb inflation but needs to move even more swiftly toward a market-driven exchange rate.

Two prominent Beijing economists are urging the government to let the yuan float freely as a way to limit the country's immense foreign-exchange reserves, fight inflation and spur the remaking of the Chinese growth model.

"We should quickly stop buying foreign exchange in the market," said Huang Yiping, an economist at Peking University's China Macroeconomic Research Center, told The Wall Street Journal.

"We can have a conditional free float; let the exchange rate be set by the market," Mr. Huang said, adding that under such conditions he figures the yuan would appreciate about 30% in a year, to about five yuan to the dollar.

Mr. Huang is working on his proposal with Yu Yongding, a former adviser to the central bank and a professor at the Chinese Academy of Social Sciences. Mr. Yu in March published an article called "Learning to Float," in which he argued that the Chinese government "should be able to help enterprises and workers that suffer undue pain from the renminbi's appreciation."

China Stock Shares

China shares rose on light volume on Tuesday helped by defensive sectors, though may follow Hong Kong stocks lower as investors persistently move money out of commodity-related sectors on uncertainty over the growth outlook.

Utilities, in particular independent power producers (IPPS), outperformed on expectations that power shortages in China would boost demand while a stall in the commodity rally continued to weigh on cyclical stocks such as oil and coal producers.

Hong Kong's Hang Seng ended down 0.4 percent as large cap financials shed early gains despite Chinese banks reporting robust first-quarter results last week. The China Enterprises Index of top locally listed mainland companies fell 0.8 percent.

In China, the Shanghai Composite Index ended up 0.7 percent at 2,932.2 but A-share turnover at 9.6 billion yuan remained 20 percent below the average over the past month, suggesting a lot of investors were cautious about participating in markets.

"The rebound today is not supported by volume, so it's likely to be a short-term rebound after a sharp dip in some sectors," said Cao Xuefeng, head of research at Huaxi Securities in Chengdu.

China should take the lead in formulating a single currency for Asia, given the large size of its economy, suggested Lim Siang Chai, Malaysia's deputy minister of finance.

A unified currency in Asia, where most countries are emerging economies that might easily attract hot money inflows from industrialized nations, could help diminish the risk of exchange rate fluctuations and help boost the region's trade, said Lim in an exclusive interview with China Daily.

"Without China's leadership, it's hard for Asia to achieve the goal of having a solitary currency," Lim said.

He added that, amid increasing trade between China and the Association of Southeast Asian Nations (ASEAN) since the implementation of the China-ASEAN Free Trade Area, a single currency would also reduce the cost of transactions for the settlement of trade.