BEIJING -
China's central bank said February 21 that the
yuan will stay stable in 2006, even as US
manufacturers continued to allege the Chinese
currency is undervalued by as much as 40%.
The value of the Chinese currency will
stand at a reasonable and balanced level, the
People's Bank of China (PBoC), the country's
central bank, reiterated in a report. It pledged
to upgrade the
managed, floating exchange
rate system to cater to the need of China's
economic development and financial stability, in
an "independent, controllable and progressive"
way.
US manufacturers argue that the yuan
is kept "artificially lower" to make Chinese goods
cheaper for American consumers and US products
more expensive in China, and the US government
says China accounted for a quarter of the
country's trade deficit last year.
Pressure on China for another yuan
revaluation is reportedly increasing. But the PBoC
report said, "The exchange rate plays a certain
role in adjusting international payments, but it
[alone cannot] take that responsibility." Policies
on foreign trade, resource pricing and foreign
exchange management should combine to promote the
balance of international payments, it added.
The Chinese currency has gained nearly 3%
against the US dollar since its July 21
revaluation, trading at a central parity rate of
8.0485 versus the dollar on February 21.
Early this year, China began a new policy
of calculating the yuan's value against the US
dollar using a weighted average of the prices
given by major commercial banks. The highest and
lowest offers are excluded from the calculation.
Giving banks a role in setting the new
daily benchmark, or the central parity rate, is
seen as a sign that the PBoC is willing to allow
market forces a greater role in daily trading,
analysts acknowledge. The market force will play a
"fundamental" role in the determination of the
yuan's value, the central bank reiterated in its
Tuesday report.
A central bank survey last
November on 1,113 enterprises with foreign trade
rights showed that Chinese enterprises responded
positively to the new exchange rate mechanism.
Nearly three-quarters of these enterprises say
their exports either rose or remained stable in
November.
Earlier figures showed that
trade surpluses prompted China's foreign exchange
reserves to surge to US$818.9 billion by the end
of last year, second only to Japan.
The
PBoC has stressed that a floating yuan is not
simply one that will appreciate, but the
prevailing view among industry watchers is that
the yuan will strengthen gradually this year.
