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No need for worry in weaker yuan: experts

(China Daily)

11:06, December 08, 2011

BEIJING - The recent weakening of the yuan shows the growing concerns that China's economy will slow down as other countries' demand for exports declines, analysts said on Wednesday.

Those conditions, they said, have prompted investors to seek a safe haven in the US dollar.

Even so, the Chinese currency will remain strong so long as China can maintain strong and balanced growth, the analysts said.

On Wednesday, the yuan touched the low end of its permitted daily trading range, when 6.3659 yuan were being traded for a US dollar, for the sixth trading day in a row, sparking speculation that it was depreciating. The currency is allowed to fluctuate as much as 0.5 percent above or below a middle-trading price set by the People's Bank of China (PBOC).

"The pressure for the yuan to depreciate is accumulating," said Mei Xinyu, a senior researcher at the Ministry of Commerce's Chinese Academy of International Trade and Economic Cooperation.

"The ongoing financial woes in Europe, the weak recovery in the US and the rising uncertainties in emerging markets have prompted investors to seek a safe haven in the US dollar," Mei said.

The value of the yuan has appreciated compared with the US dollar since 2005, when the PBOC loosened the currency's peg to the greenback. Since November, though, it has not risen as quickly as some expected.

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