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Widening of yuan's flotation range

(Xinhua)
Updated: 2006-09-25 15:11
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The China Securities Journal, a financial newspaper run by Xinhua, has called for the widening of the yuan's flotation range to reduce the pressure on further appreciation of China's currency.

The narrow flotation range and the anticipated appreciation of the yuan have resulted in money pouring into China from overseas, said a commentary by the paper's reporter Yu Li. A wider range will expose investors to the risk of depreciation, thus checking speculation, it continued.

The exchange rate of the yuan against the major currencies has been allowed to float within a daily range of 0.3 percent since July 2005. The value of the yuan against the dollar has risen by 2.41 percent since then, but has failed to reduce expectations of further appreciation.

The yuan's appreciation has also been insufficient to rein in the growth of China's exports, a measure advocated by its trade partners, in particular the United States.

With a monthly increase of some 20 billion dollars, it is expected that China's foreign exchange reserve will hit one trillion dollars within the year. The United States has threatened to impose punitive tariffs on Chinese exports if the yuan is not revalued.

Zhou Xiaochuan, the governor of the People's Bank of China, or the central bank, said recently that no timetable has been drawn up to allow the yuan to float in a wider range.

"Some experts believe that this stance means conditions are now ripe to expand the flotation range of the yuan. What remains to be done is choosing when and how to do it," the commentary said.