China mulls currency basket but shift seen far off
Reuters, 09.30.03, 10:56 PM ET
By Scott Hillis
BEIJING, Oct 1 (Reuters) - China, seeking a low-risk escape route from high-decibel criticism of its currency policy, is studying whether to tie the yuan to a basket of currencies rather than to the U.S. dollar.
The move, analysts say, could help deflect growing complaints from the United States, Japan and other countries over its rigid currency controls while posing little risk to the world's fastest-growing major economy.
"One option is to adopt a system under which the yuan is pegged to a basket of currencies, which will help eliminate the U.S. charges of the currency manipulation," said Chen Xingdong, chief economist at BNP Paribas Peregrine in Beijing.
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Many analysts say a basket of major currencies such as the dollar, euro <EUR=> and yen <JPY=> would be a wise interim move.
A basket, weighted to reflect trade flows, could offer more stability during the transition to a convertible yuan. If one country's economy does poorly, others are in the mix to balance things out.
"The real benefit is that it allows you to have a cushion against market volatility," said Yuwa Hedrick-Wong, Asia-Pacific economic adviser at MasterCard International in Singapore.
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