On Monday the value of the Renminbi (RMB) yuan against the US
dollar hit a new high with a central parity rate of 7.8240 yuan to
the dollar. This breaks the 7.83 mark but a senior economist has
hinted the Chinese government will allow the yuan to appreciate
further in 2007.
Li Yang, director of the Institute of Finance and Banking of the
Chinese Academy of Social Sciences, told Xinhua that China would
adopt a neutral monetary policy and allow the exchange rate of the
yuan to fluctuate within a wider band. "The likelihood of China
continuing its tight monetary policy will diminish greatly," he
said.
Li also said economic growth would decline slightly. A report
recently released by the academy showed the growth rate would drop
to 10.1 percent in 2007. Official statistics indicate China's
economic growth rate declined to 10.4 percent in the third quarter
from 11.3 percent in the second.
The economist said the foreign reserves management system might
be subject to reforms which would have a significant impact on the
national economy and the country's financial markets.
"The current monetary policy can only alleviate but can't solve
the root problem of liquidity," he said. "If the government
functions are not reformed the liquidity surplus will inevitably
increase."
He noted that the central government was mulling over a real
estate macro control system which would take into account regional
differences to slow price rises of commercial homes.?
The value of the RMB has increased by 3.65 percent since China
reformed the exchange rate system last year. The exchange rate
remained at around 8.28 yuan per US dollar for a considerable
period prior to the reform of the system on July 21, 2005.
China's foreign exchange reserves, which increased by more than
US$18 billion a month over the first nine months, are reputed to
have hit US$1 trillion after climbing to US$987.9 billion at the
end of September.
(Xinhua News Agency December 5, 2006)