Premier rules out RMB one-off surprise rise
Source: CCPIT TEX-Reuters Date: 2006-03-15
China will allow the yuan to move more flexibly but sees no need for another one-off surprise adjustment such as last July's 2.1 percent revaluation against the dollar, Premier Wen Jiabao said Tuesday in Beijing.
"According to the current market-oriented currency formation regime, there is room for the yuan to fluctuate either up or down on its own in line with changes in the market. It's no longer necessary for China to take one-off administrative measures," Wen told a news conference after the end of the annual session of parliament.
The yuan has risen by about 1 percent since it was revalued by 2.1 percent on July 21, 2005, depegged from the dollar and set free to float in a managed bands.
"There will be no more surprises," Wen said.
Last July's shift in the exchange rate regime had been foreshadowed at Wen's annual news conference last March at the Great Hall of the People, when he said yuan value adjustment in the pipeline would be a surprise, to shun speculators.
Before the July 2005 move, the yuan traded at about 8.28 to the dollar. The revaluation took it to 8.11 and it now trades at about 8.04. The United States has alleged the rate undervalues the Chinese currency and gives the country a competitive advantage in trade.
Wen noted that the yuan, also known as the renminbi (RMB), had risen against the dollar even though the US currency itself has been strong. And its gains against the euro and the yen had been even greater.
"Through this reform we have established a new RMB exchange rate regime. We will further strengthen the exchange rate system and we will expand the foreign exchange market, and allow more flexibility in the fluctuation of the Chinese currency," he said.
The administration of US President George W. Bush is under pressure to rein in a bilateral deficit that on US figures reached $201.6 billion in 2005. China, which counts Hong Kong trade separately, put its calculated surplus with the United States last year at $114.2 billion.
The US-China trade gap and yuan are expected to feature high on the agenda during Chinese President Hu Jintao's next visit to the United States, expected in late April. Some US lawmakers are threatening to impose tariffs on Chinese imports unless Beijing permits a faster rate of climb in the yuan.
