CHINESE reforms to unshackle the yuan ahead of President Hu Jintao s U.S. visit are part of the country s own long-term strategy, overseas analysts say, as the currency assumes a higher global profile.
When Hu arrives in Washington today, U.S. President Barack Obama and lawmakers will probably press China on its refusal to revalue the yuan more quickly.
IHS Global Insight analyst Alistair Thornton said a recent appreciation of the currency was no accident ahead of the visit.
But he also stressed: The steps toward renminbi (yuan) internationalization and capital account liberalization have been long thought-out and have taken place gradually over the past couple of years.
China s management of the yuan s value grossly undervalues the currency by as much as 40 percent and gives Chinese exporters an unfair trade advantage, critics argue.
But with its sights set on the yuan eventually rivaling the dollar as a global currency, China has introduced a range of policy changes aimed at making the yuan easier to convert for investment and to use internationally. In response to questions from The Wall Street Journal and Washington Post, Hu described the world s dollar-led currency system as a product of the past but admitted that internationalizing the yuan will be a fairly long process.
Chinese firms can now use the yuan to fund investments overseas in a trial announced last week, while the central bank has expanded a program to allow nearly 70,000 domestic exporters to use the yuan to settle cross-border deals. Authorities have also opened the currency to trading in Hong Kong and the United States, and invited foreign institutions to participate in the mainland s interbank bond market.
These moves are part of a broad strategy to encourage the international use of renminbi rather than being narrowly linked to Hu s visit, said Mark Williams, an analyst at London-based research firm Capital Economics.
Another trial to allow residents in the wealthy eastern city of Wenzhou to invest US$200 million a year overseas was an early sign of progress for the renminbi s convertibility on capital accounts, HSBC economist Qu Hongbin said.(SD-Agencies)
