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Yuan Past 7 to a Dollar Again

The central parity rate of the yuan, which is set by the central bank, breached the 7 mark against the US dollar again on Monday, reaching 6.982 and marking a post-revaluation high.

Analysts said the short-term growth track of the yuan has become more complicated, although it will continue to rise as the Chinese economy expands in the long run.

The value of the yuan has been hovering around the 7 mark since it first broke it early this month, shaking off the exceptionally fast appreciation trend in the first quarter.

The yuan has appreciated by more than 4 percent since the start of this year. Many economists have forecast that the yuan may rise by 8 to 10 percent for the whole of 2008. Last year, it appreciated by 6.9 percent.

The recent slowdown in yuan appreciation is normal, said Zhang Lan, head of research at Changjiang Securities. "The long-term trend is set, but temporary corrections are nothing to be surprised about."

But "the impact of the rising yuan on exporters and export-oriented manufacturers has become obvious given our survey in the Yangtze River Delta and Pearl River Delta regions", he said. "Many enterprises have gone bankrupt."

There have been expectations in overseas markets that China may make the track of yuan appreciation more unpredictable by a sudden one-shot revaluation before depreciating the yuan.

"Such a move would deal a blow not only to speculators, but domestic companies as well," said Sun Lijian, senior economist of Fudan University. "It'll be a double-edged sword."

(China Daily May 13, 2008)


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