A big movement in the yuan exchange rate would have a large impact on China's economic and financial stability next year, so maintaining the basic stability of the yuan exchange rate 'is of great significance,' the Chinese central bank-run Financial News said in a commentary Thursday.
The commentary elaborates on the position held by top policy makers at the central economic work conference on Sunday that China will maintain the 'basic stability' of the yuan exchange rate.
The article reflects often-stated concern in the government over the dangers that any sudden, rapid appreciation of the yuan could have for China. But few analysts, if any, have expected big, sharp jumps in the currency, as Beijing has made it clear since it ended a nearly two year, de facto peg to the dollar in June that no such moves were in the offing.
Some U.S. economists and politicians have indicated that they want to see a rise similar to that which occurred between mid-2005 and mid-2008, when Beijing let the yuan rise an average of about 7% a year against the dollar.
So far, the yuan has risen 2.4% against the U.S. dollar since June 19 when China said it would allow more flexibility in the currency. If sustained, that would equate to about 5% appreciation over 12 months.
The commentary said there aren't any good reasons for a big movement in the yuan, and China's trade and international payments are more balanced now. It didn't mention China's rising inflation rate, which many economists think could be tackled partly by China allowing faster yuan appreciation. ||The commentary said a stable yuan would benefit not only China, but also other economies. 'Basic stability' has long been an official watchword for China's currency policy 'including during the 2005-to-2008 period of appreciation.
'Keeping basic stability of the yuan exchange rate at a reasonable and balanced level would be advantageous to multiple parties. This not only benefits economic recovery in emerging economies and developed economies such as the U.S. and the European Union, but also is of great significance to the global economic recovery,' it said.
The commentary comes after the yuan was slightly lower against the U.S. dollar late Wednesday. U.S. Treasury Secretary Timothy Geithner and Chinese Vice Premier Wang Qishan Tuesday discussed efforts to strengthen the global economic recovery and promote more balanced growth. Public statements of the meeting issued by the U.S. Treasury and Chinese Ministry of Foreign Affairs so far didn't specify whether Wang and Geithner discussed the yuan issue.
