TIMELINE – China’s yuan reforms

SHANGHAI, June 4 (BestGrowthStock) – In July 2005, China bowed to
market and political pressure by revaluing the yuan by 2.1
percent and abandoning its decade-old peg against the dollar.

In the three years following the revaluation, the central
bank allowed the yuan to appreciate a further 19 percent
against the dollar. The yuan’s traded peak since the
revaluation was 6.8099, reached on Sept. 23, 2008.

However, since July 2008, the People’s Bank of China, the
Chinese central bank, has effectively pegged the yuan against
the dollar close to 6.83 to protect China’s economy (Read more about the fastest growing economy.) as it
confronted a slowdown due to the global financial crisis.

Pressures for China to renew the reforms, to allow the yuan
to appreciate in line with its economic strength, have mounted
again since late 2009 when global economies began to recover.

Here is a timetable of yuan reforms.

(For a related ANALYSIS [ID:nTOE64U07D])

1988 — China sets up semi-official currency swap centres
around the country to allow enterprises to trade the yuan at a
rate that more closely reflects market demand.

1994, Jan. 1 – China unifies its dual exchange rates by
bringing the official and swap centre rates into line,
officially devaluing the yuan by 33 percent overnight to 8.7 to
the dollar as part of reforms to embrace a “socialist market
economy”.

April – China sets up its first interbank currency market
— the China Foreign Exchange Trade System — in Shanghai. The
central bank intervenes in the market to keep the yuan stable.

1996, Dec. 1 – China allows the yuan to be fully
convertible under the current account.

1994-1996 — The yuan strengthens steadily from 8.7 to the
dollar to around 8.28.

1997-1999 — China wins wide praise for keeping the yuan
stable during the Asian financial crisis despite pressure to
devalue. The yuan was boxed between 8.2770 and 8.2800 for about
three years through frequent central bank intervention.

2000 — The yuan is allowed to close slightly outside the
firm end of its 30-basis point band, which is later widened by
another 10 points to 8.2760-8.2800 against the dollar.

2001, December — China joins the World Trade Organisation
and pledges to adjust its currency regime gradually.

2003 — International pressure begins mounting for the yuan
to appreciate to help balance global trade, including China’s
huge trade surplus with the United States and the rest of the
world.

2004, Dec. 8 — Premier Wen Jiabao says that China would
move gradually to a flexible currency regime.

2005, July 21 – China revalues the yuan by 2.1 percent and
revises the rules governing its currency system, saying it had
shifted to “a managed floating exchange rate based on market
supply and demand with reference to a basket of currencies”.

Investment Basics

(For a FACTBOX on the system, please click [ID:nTOE64U07S])
(Reporting by Lu Jianxin and Edmund Klamann)

TIMELINE – China’s yuan reforms