Chinese School - Yuan likely to be more flexible

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BIZCHINA / From the Watchdogs

Yuan likely to be more flexible

(Xinhua)
Updated: 2007-07-09 09:23

The Chinese currency yuan will gradually become more flexible, Yi Gang,
assistant Governor of the People's Bank of China said at a forum on
Saturday.

China will improve the RMB exchange rate formation system, said the
official, echoing a joint statement from the third EU-China Economic and
Financial Dialogue held in Brussels on Wednesday.

In the statement, China promised to carry out appropriate macroeconomic
policies including a prudent fiscal policy as well as a prudent and
moderately tight monetary policy, deepen structural reforms and speed up
the transformation of economic growth patterns so as to achieve
sustainable growth.

The official did not reveal when and to what extent the floating band of
yuan would be widened.

"The yuan exchange rate will be managed in a rational and balanced
manner," he said.

Along with yuan exchange rate reform, China will adopt a package of
measures to reduce its massive trade surplus and curb excessive
liquidity, said the official, citing policies including encouraging
consumption and domestic demand, further opening up the domestic market,
increasing imports and promoting investment overseas.

The central parity rate of the yuan, also known as the Renminbi (RMB),
stood at 7.5951 yuan to one US dollar on July 3, the first time the
yuan's value has exceeded the 7.60 mark after it breached 7.7 level on
May 8.

The cumulative appreciation since July 21, 2005, when China discontinued
the yuan peg to the greenback, is more than 7.5 percent.

The central bank allows a trading band of 0.5 percent on either side of
the midpoint on the inter-bank market.

The stable growth of the national economy and the upcoming 2008 Olympic
Games have boosted investors' confidence and have played a role,
according to Tan Yaling, a research analyst with the Bank of China.

The gradual revaluation of the yuan would be good for the country's
stability in terms of economic growth, Tan said.

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