Is China resuming yuan appreciation? (2)

08:18, April 09, 2010      

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If the RMB started to strengthen against U.S. dollar under current conditions, expectations for further appreciation would be increased, which would accelerate the influx of speculative international capital and lead to serious inflation and asset bubbles in the country, she said.

China unpegged the yuan from the U.S. dollar in July 2005 and allowed it to fluctuate against a basket of currencies. It gained 21 percent before stabilizing against the dollar in the middle of 2008.

China's central bank governor Zhou Xiaochuan indicated last month the current exchange rate policy was part of the country's stimulus package, and the country would cautiously choose the timing to move from the "special policy" to a "regular policy."

A strong and one-off yuan appreciation would cool the economy, hurt the world economic recovery and hurt overseas consumers' interests, said Xia Bin, a researcher with the Development Research Center under the State Council, China's Cabinet.

Xia was one of the three economists named last month as members of the People's Bank of China's monetary policy committee, a key advisor in framing monetary policy.

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