The People’s Bank of China (PBOC, central) announced today that beginning Monday, will widen the yuan’s fluctuation band against the dollar by 1 percent, compared to up 0.5 percent so far in force.
The PBOC said it through a statement on its website, which justifies its decision on the “development of China’s foreign exchange market and capacity-building pricing and risk management of agents the market. ”
The announcement comes a month after the governor of the bank, Zhou Xiaochuan, the Asian country to observe that it was considering expanding “appropriate” margin of fluctuation of the yuan, an undervalued currency by major trading partners of the second economy world.
Unlike most of the world major currencies, whose value is set according to supply and demand, in the case of China which is the PBOC sets yuan’s daily rate.
The decision, as the bank notes has been taken in order to adapt to the demands of market development and has been driven by increased operational maturity of business entities, increasingly “more able to manage their risks.”
China says one of the goals is, over time, adopt a free float system for the yuan is fully convertible.
Zhao Qingming, a financial analyst Chinese, said about the move will help “maintain the yuan’s exchange rate at stable levels,” according to the official Xinhua news agency.
In the same vein, a director of China Industrial Bank said the initiative “has been anticipated for a long time” and hopes that in about ten months, the range is expanded to 2.5 percent.
For many experts, it is a “symbolic move” denoting that the era of the rigidity of the coin “has come to an end”, but in other circles there is some skepticism about that’s going to be possible in the short or medium term.
Since June 2010, Beijing allows the yuan to fluctuate about 0.5 by the way against the dollar.
China’s economic growth has slowed to 8.1 by the way in the first quarter of 2012 over the same period of 2011, eight percent less than in the last quarter of last year, said yesterday the National Bureau of Statistics ( NBS).
Category: Business News