Foreign Exchange News
- Gradual approach to yuan reform stressed
Date: 16-Jan-2007 Sources: (Shenzhen Daily)
THE government will extend its gradualist approach to reforming the yuan with the ultimate goal of achieving a market-driven exchange rate, a newspaper run by the central bank said in a front-page editorial over the weekend.
The Financial News said exchange rate reform should be accompanied by policy changes in many other areas that cannot be completed quickly.
'In addition to scrapping the fixed exchange rate system, there is a series of deep-rooted problems, including China's growth model, a backward foreign exchange market, weak bank pricing power and a lack of risk management tools,'the paper said.
Therefore, yuan reform 'still has a long way to go?and the progress to date is only 'the first step in a long march.'
In addition, the editorial said that domestic companies have yet to fully adapt to a flexible yuan, even though they are learning to cope with a fluctuating exchange rate.
It said the ultimate goal of yuan reform was to reach the point at which market forces determine the currency's value.
The yuan closed Friday at 7.7984 per U.S. dollar, a gain of 4 percent since the currency was revalued by 2.1 percent in July 2005 and cut free from a dollar peg to float within managed bands.
The yuan rose 3.4 percent in 2006 and a report by the Ministry of Commerce said a similar rate of climb was likely this year. By the end of 2007, the yuan's cumulative appreciation will have reached 9-10 percent, it said.
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