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Yuan rises to new 12-year high
(Xinhua)
Updated: 2006-04-01 16:21
China's currency strengthened on Friday to its highest level against the U.S.
dollar since its July 21 revaluation on high market expectations and ahead of a
planned visit by Chinese President Hu Jintao to Washington.
The
Shanghai-based China Foreign Exchange Trade System reported the daily benchmark,
or the central parity rate for the dollar stood at 8.0170 yuan, falling for the
first time below 8.02 yuan, a new low over the past 12 years.
The
Chinese currency, also known as renminbi or RMB, chalked up the biggest weekly
appreciation from last Monday to Friday, and gained more than 3 percent since
the July yuan reform.
The market welcomed the news that President Hu
Jintao is due to visit the United States and that China's foreign exchange
reserves had ballooned up to be the biggest of any country, said Cao Honghui, a
finance research fellow with the Chinese Academy of Social Sciences, a
high-profile government think-tank.
Hu will pay a state visit to the
United States in mid or late April, a trip a Foreign Ministry spokesman said is
aimed at enhancing mutual trust and expanding common understanding.
China raised the value of yuan by 2 percent and scrapped its decade-old
peg to the U.S. dollar, instead of linking it to a basket of currencies and
allowing it to float up or down within a limited range.
But the United
States said the rise is too small. American manufactures contend that RMB was
undervalued by as much as 40 percent, giving Chinese exporters an "unfair" price
advantage and hurting the U.S. labor market.
The U.S. pressure on
China's currency issue built up as China's trade surplus with the United States
hit a new high in 2005. Statistics provided by China and the United States
differ significantly. China said the Sino-U.S. trade hit 212 billion U.S.
dollars last year.
Two U.S. senators have said they would delay for six
months a vote on a bill punishing China for "restricting its exchange rate, "
saying they had seen "signs of currency reform" during a recent trip to China.
The bill, sponsored by Republican Senator Lindsey Graham and Democratic
Senator Charles Schumer, would impose 27.5 percent tariffs on Chinese imports if
the currency dispute is not settled. The lawmakers said if the pace of China's
currency reform slowed, they would call for a vote.
The media reported
little about the currency topic during a visit by U.S. Commerce Secretary Carlos
Gutierrez to Beijing on the heels of the two senators.
Chinese Vice
Premier Wu Yi will leave Beijing on Monday for Washington to co-chair the 17th
meeting of the Sino-U.S. Joint Commission on Commerce and Trade with Gutierrez
and U.S. Trade Representative Rob Portman. The two sides will discuss their
respective concerns, China's Foreign Ministry has said.
China's foreign
currency reserves are boosted as the country buys dollars and other foreign
currencies that come into the economy, amid booming foreign trade, and
stockpiles them in U.S. Treasury bonds and other assets -- as a means of foreign
exchange controls and to guard against possible inflation, analysts say.
The China Business News has reported, citing unnamed sources, the
nation's foreign currency reserves reached 853.7 billion U.S. dollars by the end
of February, likely topping Japan's to become the world's largest. Government
figures were only released on a quarterly basis.
Central banker Zhou
Xiaochuan, however, has said it is "not reliable" to achieve Sino-U.S. trade
balance only through adjusting exchange rates.
Li Chao, a spokesman for
the People's Bank of China (PBoC), or the country's central bank, also contended
last week that the skewed trade with the United States was an outcome of a high
savings rate in China as against an extremely low one in the United States. In
theory, excess savings produce trade surpluses, and vice-versa, savings
shortfall means deficits, he acknowledged.
China will not have another
one-off revaluation of yuan, he said,echoing an earlier claim by Premier Wen
Jiabao.
The PBoC early this year began a new policy of calculating the
yuan's benchmark value against the U.S. dollar using a weighted average of the
prices given by major banks. The highest and lowest offers are excluded from the
calculation.
Giving banks a role in setting the daily exchange rate is
seen as a sign that the central bank is willing to allow market forces a greater
role in daily trading, analysts acknowledge.
But the yuan is allowed to
move 0.3 percent up or down from the benchmark value against the dollar per day.
"Only propelled by new market factors can the floating band be enlarged," said
director Xia Bin with the finance research institute of the State Council
Development Research Center.
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