CRI Home - Photo- Forums - Talk China - Surf China - About China -  
  Webcast | CRI Today | China | World | Biz | SciTech | Sports | Life | Showbiz | Easy FM | Learn Chinese / English | Weather | Events
 
 
 
 
China Severs Its Currency's Link to Dollar
2005-7-21 21:43:04      Associated Press
China dropped its politically volatile policy of linking its currency to the U.S. dollar but retained controls on its exchange rate, switching the link to a basket of foreign currencies in a move that could push up the price of Chinese exports to the United States and Europe.

China strengthened the state-set exchange rate of the yuan currency to 8.11 to the U.S. dollar from 8.277, where it had been fixed for more than a decade, the government said in a surprise announcement on state television's evening news. That raised the value of one yuan by about one-quarter of one U.S. cent to 12.33 cents.

China had been under pressure for years from its trading partners to let the yuan float or at least to raise its exchange rate. The United States and others said it undervalued the yuan by up to 40 percent, giving Chinese exporters an unfair price advantage.

The change Thursday appeared to be too small to satisfy the United States or other governments, which say inexpensive Chinese imports are threatening thousands of jobs.

"This is the start of a gradual appreciation process," said Frank Gong, managing director of JPMorgan Chase & Co. in Hong Kong. "It will help balance Chinese trade flows. Export volumes will come down. Import volumes will pick up. It will help reduce trade tensions."

Malaysia simultaneously announced it was dropping its own policy tying its currency, the ringgit, to the U.S. dollar and would adopt a similar arrangement.

Some U.S. lawmakers had threatened to impose retaliatory tariffs if China didn't adjust its yuan trading scheme.

The yuan will now be allowed to trade in a tight 0.3 percent band against a basket of foreign currencies, the government said. It didn't say which currencies.

It said the central bank would announce the yuan's closing price each day, and that rate would be the midpoint of the next day's trading band.

Chinese leaders have said for years that they eventually would let the yuan trade freely on world markets. But they said any decision would be based on China's economic needs, not foreign pressure.

Chinese officials said any abrupt change in its currency system would cause turmoil, hurting its fragile banks and financial industries.


        Talk China        Print        Email        Recommend
 
Related Stories:
v China Changes Currency Strategy 07-21
v Floating And Fixed Exchange Rates 07-21
v Yuan-Dollar Peg Loosened for First Time in a Decade 07-21

  Copyright of crienglish.com. All rights reserved.

Reproduction of text for non-commercial purposes is permitted provided that both the source and author are acknowledged and a notifying email is sent to us.
 
 

 
postalChina Post is progressing with its scheme to merge its two sub-businesses.
textilePeter Mandelson said he would hold talks with Bo Xilai this week.
YahooChinese e-commerce operator Alibaba.com is in the late stages of talks to sell a 35 percent stake to Yahoo Inc.
BOC IPO Could Take Place in 2005
China, Hong Kong, Japan, and Aussie Market Roundup 
CNOOC's Market Value Up By $7b
Producer Price Index Rises
Lenovo Profit Up 6% After IBM PC Buy
Power Supply Sees Robust Growth
HK Urges Manufacturers to Go "Green"
Major HK Banks's Interest Rate Hike
China Mobile First-Half Profit Rises