Foreign Exchange News
- China can afford 5% yuan rise yearly
Date: 5-Jan-2007 Sources: (Shenzhen Daily)
CHINA should continue with a gradual approach to yuan appreciation, but it could also let the currency strengthen more quickly, by about 5 percent a year, a government economist said in comments published Thursday.
Chen Dongqi, vice president of the Academy of Macroeconomic Research, told the overseas edition of the People's Daily that because the effects of the government's yuan reform to date had been positive, it could afford to loosen the reins further.
'The degree of the changes could be enlarged a bit, though it cannot be too drastic. An annual appreciation of 5 percent would be appropriate,'Chen said in an interview.
His think tank is affiliated with the National Development and Reform Commission, the country's economic planning agency.
The central bank revalued the yuan by 2.1 percent and decoupled it from a U.S. dollar peg in July 2005. It has since appreciated a further 3.9 percent - 3.4 percent of which occurred in 2006.
Many traders and economists expect the yuan to strengthen by around 5 percent this year.
Chen also said that the government should continue with a restrictive monetary policy in the near term, focusing on curbing credit and investment growth.
He also suggested that China make better use of interest rates to control the economy, by employing a series of small rises instead of infrequent, bigger changes.
Chen also urged authorities to make timely adjustments to foreign exchange policies and to step up their efforts to control pollution and energy consumption.
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