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Economic conditions

China Reaffirms Gradual Yuan Flexibility, Rejecting US Pressure

Strategic Insights

— 1 min read

China's central bank has maintained its commitment to gradually increasing the yuan's flexibility, despite growing US pressure to allow the currency to trade more freely. Wu Xiaoling, deputy governor of the People's Bank of China, emphasized that the country would rely on market forces to determine the exchange rate, while also reassuring that there would be no significant fluctuations in foreign exchange rates. This stance comes as US senators Charles Schumer and Lindsey Graham prepare to visit Beijing to discuss the issue and potentially make a decision on a bill threatening a 27.5 per cent import tariff.

Key Takeaways:

  • China's central bank reaffirms its commitment to gradually increasing the yuan's flexibility, citing market forces as the primary driver.
  • Wu Xiaoling, deputy governor of the People's Bank of China, emphasizes that there will be no wide fluctuations in foreign exchange rates, as this could harm the country's economic development.
  • The yuan's flexibility is increasing gradually, with the central bank allowing market supply and demand to play a fundamental role in forming the exchange rate.
  • US senators Charles Schumer and Lindsey Graham will visit Beijing and Shanghai before deciding whether to proceed with a vote on their bill by March 31.
  • China's trade surplus tripled to a record $102 billion last year, driving economic growth of 9.9 per cent.
  • The yuan has gained almost 1 per cent since the revaluation, with a significant weekly increase against the dollar.
  • China is also under pressure to let the yuan trade more freely before the US Treasury's semi-annual report on global currency manipulation and President Hu Jintao's visit to the US next month.
  • Wu points out that there would be no link between President Hu's visit and the change of China's policy on the yuan's value.

Statistics:

  • China's trade surplus reached a record $102 billion in 2010.
  • The yuan has gained almost 1 per cent since the revaluation.
  • Chinese companies spent over $6 billion abroad in 2005.
  • China's economic growth reached 9.9 per cent in 2010.
  • The US Treasury's semi-annual report on global currency manipulation is due.

Sources:

  • Asia Pulse
  • Bloomberg report, March 11
  • Wu Xiaoling, deputy governor of the People's Bank of China, at a financial forum in Beijing on Saturday, March 20.

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