Beijing will revalue the Yuan
Over the course of the next trimester China will revalue its currency, the yuan, with respect to the dollar, as stated in the financial news bulletin published by one the world's largest financial investment companies, Goldman Sachs.
In order to bring the yuan to an "adequate" exchange rate, the American company believes that a 10% revaluation might be necessary. Goldman Sachs predicts China will revalue its currency only by 2.5%, as a first prudent step toward system of more flexible exchange rates. The yuan's accumulated appreciation over the next twelve months could then be at 5%.
Currently the Chinese currency is not exchanged freely and the rate is set by the government monetary authority based on a fixed counter-rate with respect to the dollar (1 dollar = 8 yuan).
According to the Goldman Sach's report, China will set the exchange rate not only based on the American dollar, but also on a basket of other currencies reflecting the current commercial flow of merchandise. The dollar would be valued at no more than 63% of such a basket. The euro and yen would make up the remainder. Goldman Sachs states that it based its predictions on financial summaries found in Chinese newspapers, according to which authorities are said to be studying for a reform which would link the yuan to 11 foreign currencies.
Goldman Sach's announcement has been heard strongly all over Asia, particularly in India and Taiwan, who are competitors with China and worried about exploding Chinese competition. The Taiwan Times attributed China's likely decision to American pressure, without however supplying any details.
At any rate, there still exists the anomaly of a currency which is not freely exchanged on the international market, like that of the yuan, and yet which can be revalued.
However, according to the People's Daily, China is thinking of granting greater monetary freedom to local enterprise. (MDO)
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12/11/2009
