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The governor of China's central bank, Zhou Xiaochuan, hinted in a press conference on March 6 that the yuan would be left to appreciate versus the dollar but stopped well short of indicating when an adjustment would occur.Reuters says: "China cautions against expecting fast yuan rise"
The Chinese currency has been pegged at 6.83 yuan to the dollar since July 2008 when Beijing froze its exchange rate as the world-wide recession rocked the markets. Previously, the yuan had been left to appreciate versus the dollar since 2005 when the People's Bank of China ended a decades-old policy of tying the yuan to the dollar.
Xiaochuan did not give any details on when the bank would take action to loosen controls on the yuan.
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Any rise in the yuan's exchange rate will be gradual, China's trade chief said on Monday in comments that underline the competing interests at the heart of Chinese policy-making.
Commerce Minister Chen Deming said a halt to the yuan's appreciation since mid-2008 was part of a panoply of pro-growth policies to prop up the economy during the global credit crunch.
"Exiting from the stimulus does not mean all these measures will disappear. They will still be there, but there will be some fine-tuning," Chen told Reuters on the sidelines of the country's annual session of parliament.
China has effectively re-pegged its exchange rate at around 6.83 yuan CNY=CFXS per dollar since mid-2008 to help its exporters during the global financial crisis and is under intense pressure from the United States and Europe to abandon the peg.
"The movement and degree of stability in the yuan in times of crisis ought to be different from when there is no crisis," he said. But he added: "The direction of yuan reform will be gradual and controlled."
Central bank governor Zhou Xiaochuan, speaking on Saturday, also stressed the need for policymakers to proceed with caution.
But Zhou broke new ground by stating that exiting the stimulus would sooner or later spell the end of the "special yuan policy" adopted to counter the financial crisis.
"This is the most explicit comment on the renminbi's exit from current de-facto peg made publicly by top Chinese policymakers so far," HSBC's chief China economist, Qu Hongbin, said in a note to clients. The yuan is also called the renminbi....MORE