Wandering China

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China to allow more exchange rate flexibility [Straits Times]


China to allow more exchange rate flexibility
AP
Source – Straits Times, published June 20, 2010

Beijing – China’s central bank said yesterday the country would allow more exchange rate flexibility, but there was no basis for a large-scale appreciation of the yuan.

‘The global economy is gradually recovering. The recovery and upturn of the Chinese economy has become more solid with the enhanced economic stability,’ the central bank statement said.

‘It is desirable to proceed further with reform of the yuan exchange rate regime and increase the yuan exchange rate flexibility…

‘The exchange rate floating bands will remain the same as previously announced in the interbank foreign exchange market.’ The statement gave no specifics.

Chinese officials have said this year that change will be gradual.

Yesterday, US President Barack Obama welcomed the move, saying in a statement: ‘China’s decision to increase the flexibility of its exchange rate is a constructive step that can help safeguard the recovery and contribute to a more balanced global economy.’

Markets will be watched closely tomorrow for the effects of the announcement, which was posted on the bank’s website.

China’s decision was also welcomed by International Monetary Fund chief Dominique Strauss- Kahn.

‘A stronger renminbi…will help increase Chinese household income and provide the incentives necessary to reorient investment towards industries that serve the Chinese consumer,’ he said.

The yuan has been frozen against the dollar since late 2008 to help Chinese manufacturers compete amid weak global demand, and China has been under pressure from the US and other countries, which say the yuan is undervalued.

Chinese officials in the past week have warned that any adjustment to the exchange rate is not the concern of other countries.

The issue will follow President Hu Jintao to this week’s Group of 20 meeting in Toronto, but the director of the international department of the People’s Bank of China, Mr Zhang Tao, said that Chinese leaders will not discuss the yuan at the summit.

AP

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Filed under: Chinese Model, Economics, Finance, International Relations, Media, Politics, Public Diplomacy, U.S., Yuan

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