China pledges yuan stability

China’s currency policy has been
criticised by the West China’s central bank says it plans to keep the Chinese
yuan “stable” and there will be no immediate revaluation of the currency.

The comments come just a day after
the bank announced plans to make the exchange rate more flexible.

But Chinese authorities have ruled
out a large, one-off adjustment in the exchange rate.

China has come under increasing
international pressure to change its currency policy.

The US in particular has complained
that China is artificially keeping the value of the yuan low to help its
exporters at the expense of foreign competitors.

On Saturday, US President Barack
Obama welcomed China’s promise of increased flexibility in exchange rates, but
the Chinese central bank’s latest comments cast doubt over the scale of its
plans.

“There is at present no basis for
major fluctuation or change in the [yuan] exchange rate,” the bank’s website
said.

The “basic stability” of the
currency would be maintained, it added, and keeping the yuan at a “reasonable,
balanced level” would help ensure economic stability.

“The management and adjustment of
the [yuan] exchange rate needs to be done in a gradual way.”

China has effectively pegged the
yuan to the US dollar for the last two years.

In 2005, it briefly allowed a
controlled appreciation of the currency, but ended that policy when the global
economic crisis threatened demand for its goods abroad.

The yuan has stayed at around 6.83
yuan to $1 since then, and would be expected to rise higher given a totally
free exchange rate.

According to the BBC’s Chris Hogg
in Shanghai, analysts expect the yuan to appreciate slowly – by around 0.2 per
cent a month – in line with a recovery in demand from Europe.

China’s currency
policy was expected to be high on the agenda at the G20 summit to be held in Toronto
later this month.

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