China sets highest Yuan rate in five years

06-28-2010 09:34

Many criticisers claim that China stimulates its exports by keeping the exchange rate of the Yuan low. China has set the rate of the Yuan at the highest levels in five years. Earlier, Beijing stated that it would allow the currency more flexibility. The decision comes after the G20 meeting in Canada last weekend.

Chinese Yuan

Beijing has faced increased pressure to let its currency rise. Especially the US claimed that the low rate of the Yuan favors China’s exports and creates dishonest competition.
During the G20 summit, Barack Obama urged that China permits the rate for the Yuan to climb in the next couple of months. Nevertheless, currency analysts don’t expect the rate of the Yuan to rise strongly in the short term.

Currency peg

The Chinese government will not take measures that don’t stimulate the Chinese economy. China isn’t impressed by the international pressure and it has excluded a major shift in the value of the Yuan’s rate.
Beijing sets the rate of exchange between the Chinese currency and the Greenback every working day. Chinese officials permit the rate to fluctuate within the range of 0.5%. Today, the central parity rate was set at 6.789, which is the highest rate since China removed the peg in July 2005.

Trading range

China let the Yuan fluctuate between 2005 and 2008. In those three years, the rate of the Chinese currency increased by 21%. In 2008, China pegged the Yuan to the Dollar in order to support its exports to endure the economic recession. Previously in June, China stated it would allow its currency more flexibility. Beijing recently increased the Yuan’s official trading range, which was the initial raise since the statement.