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Central bank: Yuan rates already market regulating
(chinadaily.com.cn)
Updated: 2005-07-31 09:58
The People's Bank of China, the central bank, said the
yuan exchange rate is now made floating according to market forces, ruling out
any more government-decreed revaluation of its currency, also called Renminbi.
A man looks at an electronic board that show
latest foreign exchange rate at a Bank of China branch in Wuxi, East
China's Jiangsu Province July 25, 2005.
[newsphoto] |
Since its 2.1 per cent appreciation of the yuan announced on July 21, there
are growing expectations in the Western world that further revaluations will
follow, triggering increasing speculative fund inflows. Some critics in
Washington have also called for a much more substantial rise of the Renminbi
against the US dollar.
"Some foreign people have tried to create misunderstanding by saying the
adjustment is an initial move and there will be more to come," the bank said in
a statement, adding that such foreigners had come up with such explanation "to
suit their own purposes". In fact, the bank said, the renminbi rate was being
set "according to objective rules".
"These movements will be created by the floating mechanism and there will be
no more official adjustments of the renminbi level," it said.
The central bank said that in trading since revaluation, the yuan had been
reflecting market forces and movements in international currency exchange rates.
Renminbi non-deliverable forwards, an off-shore instrument used to bet on the
Chinese currency, suggest investors expect significant further appreciation of
the renminbi over the next 12 months, the Financial Times reported.
The newspaper quoted Professor Michael Pettis of the Guanghua School of
Management at Peking University as saying market expectations might be difficult
to change, since pressure for revaluation had largely been driven by trade
imbalances and money supply concerns.
The central bank's new regime for rates formulation - a "managed float" based
on "market supply and demand with reference to a basket of currencies" - means
that the bank's claim that yuan rates will reflect market movements must be
taken on trust, the paper said.
Some analysts say the lack of clarity, including the details of the said
basket of currencies, is intentional, aimed at giving the bank more flexibility
in setting its new renminbi policy.
Earlier last week, Li Deshui, commissioner of the National Bureau of
Statistics who also sits at the central bank's policy research and making
commission, told reporters that the capital account won't be let open to market
speculation funds, and the yuan won't become fully convertible in at least five
years.
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