BIZCHINA / Center

NBS: No one-off RMB appreciation
(AFP)
Updated: 2006-07-18 19:53

They said the data was expected to increase pressure on China to revalue the yuan as part of efforts to better balance the economy and reduce its dependence for growth on exports.

In July last year, the government, under pressure from its trade partners led by the United States, revalued the yuan by 2.1 percent against the dollar and allowed it to trade within set bands against the US and other currencies.

Despite the United States saying the yuan is still being artificially kept too low, China has maintained the current forex regime is appropriate to its stage of development and that it will pursue gradual reform.

Zheng, the NBS spokesman, on Tuesday again defended the system.

"It has come to play a positive role and has been welcomed and met with a positive appraisal from the international community," he told a briefing in Beijing.

While no drastic adjustment was expected, analysts argued that some sort of change was needed to re-balance the Chinese economy and wean it off its reliance on exports and investment.

"China urgently needs to rebalance the economy, cooling down investment and relying less on exports and more on domestic consumption," said Robert Subbaraman, a Tokyo-based economist with Lehman Brothers.

Hong Liang, an economist with Goldman Sachs (Asia) in Hong Kong, said the yuan would appreciate in the second half, expecting its daily dollar trading band to widen from its current 0.3 percent to around one percent.

"Following a weaker US dollar, the yuan has depreciated on trade-weighted terms since late last year, adding further fuel to export strength and diluting the impact of monetary tightening (made in April)," she said.


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