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.
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