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Yuan to face downward pressure in 2012

By Wang Xiaotian (China Daily)

09:14, March 15, 2012

Investment growth rate to decline by more than half: senior researcher

The yuan will be under increasing downward pressure in 2012, and the increase in yuan holdings for foreign exchange purchases and the investment growth rate will both decline by more than half, a senior researcher close to the authorities said on Wednesday.

Liu Yuhui, director of the financial laboratory at the Institute of Finance & Banking at the Chinese Academy of Social Sciences, a prominent central government think tank, said he had obtained these forecasts from the central bank.

"Domestic and external conditions for yuan appreciation have changed dramatically compared with the past 10 years, leaving more room for two-way yuan fluctuation, instead of only appreciation."

Regarding external conditions, he said although yuan holdings in January had increased, the growth for each month will decline to somewhere below 150 billion yuan ($23.7 billion) in 2012, in contrast with 250 billion to 300 billion yuan in the past five years.

For 2012, the total increase in yuan holdings will shrink to 1.5 trillion yuan, compared with an average of 3 trillion yuan in the past five years.

Banks' holdings for purchasing foreign exchange, an indicator of capital flows, fell for the first time in four years in October by 25 billion yuan.


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