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Contradicting recent strong statements from Chinese officials, the Chinese Academy of Social Sciences (CASS), a government-connected think-tank, said Wednesday that now would be a good time for China’s currency, the yuan, to be appreciated 10 percent against the US dollar in a single move and then be allowed to fluctuate 3 percent annually. Economists questioned the feasibility of the proposal.

Zhang Bin, a researcher at the Institute of World Economics and Politics under the CASS, made the proposal in a report.

“It doesn’t mean that a 10 percent appreciation is the just-right level,” Zhang said. “It only means that China’s economy can handle the impact of a 10 percent appreciation of its currency.”

Zhang said now is the right time to make such a move because the hot money flowing into China on expectations of the yuan’s appreciation adds to the risk of inflation caused by the increased money supply following loose monetary policies introduced to combat the global financial crisis.

The suggestion contradicts repeated statements by the central government that the yuan would not be allowed to appreciate against the US dollar.

“We will never compromise with whomever gives us any form of pressure for currency appreciation,” Premier Wen Jiabao said in response to questions on foreign trade protectionism and disputes with China in an interview with the Xinhua news agency December 27.

The one-off appreciation against the dollar would reduce the trade surplus and correct economic structural imbalances, head off rumors of the yuan’s appreciation against the dollar, and reduce the impact of speculative capital, Zhang wrote in his report.

The report said that allowing the yuan to appreciate would also be a proactive move in maintaining good trade relations. Since last year, China has seen increasing anti-dumping cases against its exports to the US, the EU and other countries and regions that have accused China of refusing to let the yuan appreciate.

Lu Ting, an economist with Bank of America-Merrill Lynch China, said that China’s exporters couldn’t stand a 10 percent appreciation of the yuan. Many have a profit margin of less than 5 percent and would suffer losses if they had to maintain their current prices, which are often denominated in other currencies, usually the US dollar, he said. Exports contribute about 17 percent of China’s GDP, and the total volume accounts for about 30 percent of the GDP, and a further dip in exports could also cause unemployment, Lu said.

Zhang’s suggestion is unwise, Lu Zhengwei, chief economist of the Industrial Bank, said. The US has pushed for a 20-40 percent appreciation of the yuan, and with the dollar getting stronger as the economy recovers, the yuan might face further pressure, he said.

Explosive experts on Tuesday detonated a suspicious package found at court buildings in New Zealand South Island’s largest city of Christchurch.

The court complex in the central city was evacuated about 11:00a.m. Tuesday (2200 GMT Monday) after the package with protruding wires and masking tape was found by a court official on the second story after they received a bomb threat, Radio New Zealand reported.

Roads around the complex have been closed and nearby buildings have been evacuated.

A bomb robot was sent into the building before midday and a muffled explosion from the court area was heard about 1 p.m..

Tuesday is the first day of court proceedings after the Christmas holiday break.

Fuel leak reaches Sanmenxia; reservoir stops power output

The diesel fuel leak into a tributary of the Yellow River has spread downstream into Shanxi and Henan provinces, contaminating and potentially affecting the drinking water supply of many local residents.

The fuel leaking into the Weihe River has reached the Sanmenxia reservoir on the Yellow River in Henan province despite earlier efforts to prevent it from spreading into the main river.

Zhang Lijun, vice-minister of environmental protection, urged all-out efforts to protect drinking water supply at an urgently scheduled meeting yesterday.

The meeting, attended by senior officials from Henan, Shaanxi and Shanxi provinces and China National Petroleum Corp, owner of the broken oil pipeline, was held in Sanmenxia, the first point in Henan province through which the Yellow River passes.

Zhang urged the affected provinces to spare no effort to contain the contamination within the Sanmenxia Reservoir, and prevent the leak from spreading into Xiaolangdi Reservoir, 130 km downstream, as that may likely impact drinking water supply in Kaifeng and Zhengzhou, two densely populated cities in Henan province whose source of drinking water is the Yellow River.

The Sanmenxia reservoir has stopped generating electricity and dammed up the river since Jan 3 to prevent polluted water from flowing in, according to the provincial government.

Cities along the Yellow River have all added monitoring stations to check the quality of water every hour.

Water was still considered safe for drinking, as the leakage had not reached the drinking water supply sources to cities in Henan province.

A resident of Sanmenxia, surnamed Cao, yesterday told China Daily that the drinking water supply was as usual.

“I think the government will inform us if the water supply is going to be cut off, and the TV station will also broadcast the notice. So far, there has been no such information,” Cao said.

A restaurant owner surnamed Zhao also said her business was not impacted, and tap water was safe as of yesterday.

In Shanxi province, people living in Ruicheng, Pinglu, Yuanqu and Fenglingdu towns have been ordered not to use water directly from the river, according to a notice issued by the Yuncheng city government.

The four counties are located along the Yellow River and are under the administration of Yuncheng, an industrial city in the southern part of Shanxi province.

The notice said emergency stations are monitoring the water quality on a 24-hour basis since Jan 2. Residents have been asked to stop using water directly from the Yellow River for the sake of safety.

In Shaanxi province, where the diesel spillage took place, agricultural production and normal life have seen little impact. Efforts were ongoing to clean up the spill in the Chishui and Weihe rivers.

“Our water sources are upstream from the diesel leak point and our life has not been impacted much by the incident,” a villager in Chishui surnamed Bi told China Daily yesterday.

Du Xinli, the director of a water quality monitoring station located just before the junction of the Weihe River and the Yellow River in Shaanxi province, was quoted by Xinhua as saying that the diesel concentration peaked at 25.3 mg/l on Jan 2. The concentration was 0.479 mg/l on Jan 3, he said.

Some 10,000 cubic m of soil near the contaminated Chishui river had been removed to better control the pollution in the area, said Cai Xueming, deputy magistrate of Huaxian county, Shaanxi province in northwest China.

“About 1,000 sq m of land around the diesel spillage point was dug to a depth of 10 m to thoroughly clear out the diesel-polluted soil. The pits will be covered by non-polluted soil brought from other places,” Cai said.

The broken diesel pipeline, which runs from Lanzhou in Gansu province to Changsha in Hunan province, was found leaking in the wee hours of Dec 30 at a point close to the Chishui River, a tributary of the Weihe River.

Su Maolin, deputy director of the Yellow River Water Resources Commission, yesterday refuted the claim by CNPC that the broken pipeline was caused by a third-party construction project, and called for a further probe into the accident after the spill has been tackled.

Water contamination cases

Feb-March 2004

Tests on the Tuojiang River in southwestern Sichuan showed it contained excess nitrogen and ammonia - due to untreated wastewater from a fertilizer plant being diverted into it - leading to tap water getting contaminated in nearby Jianyang city.

Nov 13, 2005

A major oil spill on the Songhuajiang River temporarily cut off water supply in Harbin, the capital of Northeast China’s Heilongjiang province, affecting nearly four million people.

Nov-Dec 2007

A mining company in Southwest China’s Guizhou province discharged 1,900 tons of untreated wastewater into the Duliujiang River. Seventeen people living downstream fell sick due to arsenic poisoning.

Nov 2008

The Dashahe River was contaminated when a company in Minquan county of Shangqiu, in Central China’s Henan province, discharged wastewater that had a significant amount of arsenic in it. It is believed to be the most serious arsenic-related contamination case in China.

Feb 20, 2009

Wastewater was discharged by a chemical company into the Mangshe River, the drinking water source for Yancheng city in East China’s Jiangsu province. Potassium in the water caused serious contamination. Water supply to over 20 million residents was disrupted for over 66 hours.