China issued a fresh warning to speculators not to bet on a further rise in the yuan while giving assurances that the economy is at little risk of a sharp slowdown after last week?s landmark revaluation. The People?s Daily, the ruling Communist Party?s mouthpiece, said the central bank had demonstrated Beijing?s determination to keep the yuan ?basically stable?.

The People?s Bank of China issued what it called a ?solemn? statement yesterday saying media reports that the revaluation would be followed by other adjustments showed a misunderstanding of how China?s newly adopted managed float would work.

?It?s unwise for speculative capital to put a huge one-way bet on the yuan?s appreciation,? the paper said in a commentary. The yuan was trading in Shanghai at 8.1097 per dollar, a touch firmer than Tuesday?s 8.1099 close but still hugging the rate of 8.11 set by the central bank last Thursday when it revalued the currency 2.1% from its eight-year peg near 8.28.

In the offshore derivatives market used to bet on the yuan?s direction, speculative pressure has eased since the central bank?s statement. Contracts are now pricing in a further 4.6% rise in the Chinese currency within a year, to 7.75 per dollar, less than the 6% appreciation expected on Monday.

Some advisers had advocated a bigger initial revaluation, but media reports have said the government was nervous about the economic impact of even a 5% rise in the yuan?s value. Since Thursday?s revaluation, Beijing has been at pains to emphasise that the move would not slam the brakes on the export-led growth that China needs to hold down unemployment and sustain rising living standards.

Wu Xiaoling, vice-governor of the People?s Bank of China, was quoted by the China Securities Journal as saying China would be unable to keep up its breakneck 9%-plus growth rate of the past two years, but that a slowdown would be a normal adjustment. ?Raw material constraints, a slowdown in investment growth, falling industrial profits and increased friction ? all these factors make it impossible for the economy to keep growing at the current pace on a long-run basis,? she was quoted as saying at a seminar.

Strong Trade Outlook: But Wu said still-robust investment and bank lending would support the economy, which has grown faster than 9% for two years. Second-quarter gross domestic product was up 9.5 % on a year earlier. Despite the revaluation, the Commerce Ministry expects China?s trade surplus with the United States to top $ 90 billion this year, up from $ 80.3 billion in 2004, and that with the European Union it will jump to $ 60 billion from $ 37 billion, the paper said.

The United States reported a much bigger bilateral 2004 trade deficit with China, of $ 162 billion, largely because it includes Hong Kong shipments in its figures for China.

One sign that China?s economy is slowing is that its thirst for oil has been much less than expected this year. The International Energy Agency recently cut its forecasts for 2005 global oil demand mainly on the back of the trend in China.

But Wu played down fears among some economists that the slowdown, overcapacity and last week?s revaluation could tip the economy back into deflation. Annual consumer price inflation slowed to 1.6 % in June, but Wu said deflation was unlikely because of high prices for raw materials and some services.

Meng Qingxin, a deputy director at the National Bureau of Statistics, said that, while China?s growth was likely to slow this year, upward pressure on prices for crude oil, power, coal and in other raw materials had not yet eased. The China Securities Journal quoted Meng as telling the same seminar as Wu that consumer price inflation for the second half of this year would pick up to about 2.5% while producer price inflation for all of 2005 would be about 5.8%. Producer prices rose 6.1% in 2004 but the annual rate has eased since late last year. It stood at 5.2 % in June.