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Strategies & Market Trends : China Warehouse- More Than Crockery -- Ignore unavailable to you. Want to Upgrade?

To: RealMuLan who wrote (2209)	12/22/2003 1:53:09 PM
From: RealMuLan	Read Replies (1) \| Respond to of 6370

China plans yuan link to currency basket: report Posted: 12:39 PM \| Dec. 22, 2003 Agence France-Presse printable version email a story write the editor feedback BEIJING -- China's central bank is quietly moving ahead with a plan to peg the yuan to a basket of 10 currencies, instead of the US dollar alone, state press reported Monday. A prospective 10 currencies would represent the bulk of China's trade with the rest of the world as well as its main sources of investment, the China Business Post reported, citing sources with the People's Bank of China. China could eventually allow a "managed float" that would permit the currency to move within a set range. The report gave no timetable for either phase and stressed that this policy was still being studied. It comes as a group of US government experts prepare to visit Beijing next month to discuss possible changes to the existing foreign exchange rate regime. China has effectively pegged the yuan at about 8.3 to one dollar since 1994 but it has come under increasing pressure, particularly from the United States, to revalue. Washington politicians insist that the yuan is substantially undervalued and contributing to a mounting Chinese trade surplus with the US and the loss of American jobs. US Federal Reserve chairman Alan Greenspan and many independent economists have rejected those claims. For its part China has publicly maintained that the problem is structural, reflecting its much lower labor costs, but has signaled a certain willingness to investigate a more flexible currency regime. China has been studying a peg of the yuan to a basket of currencies since the beginning of the year to allow the exchange rate to appropriately reflect the country's trade performance and avoid short-term foreign exchange rate fluctuations, the China Business Post said. According to local statistics, China's major trade partners in 2002 were the US, Japan, Hong Kong, the Euro zone countries, followed by Indonesia, Malaysia, Singapore, Thailand, South Korea and Taiwan. They accounted for more than 89 percent of China's total trade volume with the world. As such, the currencies in the basket would be given a weighting according to their relative importance in terms of trade and investment. The newspaper also quoted a central bank analyst as saying that the yuan was not undervalued by 20 to 40 percent as some foreign economists maintain, with any link of the yuan to a basket of currencies likely to lead to only a modest increase in the local currency's value. money.inq7.net