Expectation for Further Revaluation of Yuan Ebbs

[HenryTo]

Looks like China's Central Bank is still going the right direction. Slow and steady...
-----------------------------------------------------------------------------
Expectation for Further Revaluation of Yuan Ebbs

BEIJING, Nov 10 Asia Pulse - The worldwide expectation for further appreciation of the Chinese currency, the yuan, is ebbing as the current exchange rate is "basically stable and the yuan is floating in a normal way," a report released by China's central bank says on Wednesday.
The quarterly report on the implementation of China's monetary policy, published by the People's Bank of China (PBOC), points out that both the inflow of foreign exchange into the country and the growth of foreign exchange reserves were slowing down during the July-September period.

In the third quarter of this year, the foreign exchange reserves increased by US$58 billion, the report says.

The reserves grew by US$21.7 billion in July, US$20.5 billion in August and US$15.8 billion in September, it says.

The report believed that ever since the revaluation of the yuanon July 21, the yuan trading band against the US dollar became more flexible and better reflected the change of the exchange rates of key international currencies.

On Sept. 30, the yuan closed at 8.0920 to one dollar and was strengthened by 2.28 per cent compared with that at the end of December last year.

The central bank report also notes that the reform of the foreign exchange rate had a limited impact on Chinese enterprises,individual foreign currency holders and financial institutions, citing an August survey conducted by the PBOC.

The survey showed that the revaluation of the yuan had little impact on the foreign assets and debts of Chinese enterprises. On the contrary, it helps promote the enterprises to adjust foreign trade structure, improve efficiency and reduce consumption.

The appreciation of the yuan also has a limited impact on China's import and export enterprises, according to the survey. Itsays that only 6.6-13.7 per cent of the enterprises chose to cut exports and increase domestic sales to offset the impact.

China's individual foreign currency holders became more mature in making investments after July 21. The number of people who chose to hold foreign currencies as a way of financing increased from 15.6 per cent to 30.8 per cent.

China's financial institutions and banks, including the Big Four State-controlled banks, started offering various kinds of foreign currency financing products to clients to help them avoid risks due to the fluctuation of the Chinese currency.

The report says that the role of the new exchange rate in promoting the adjustment of the country's foreign trade structure, optimizing economic structure and achieving the goal of sustained economic development will be more remarkable in the future.

Meanwhile, the report emphasizes the importance of expanding domestic demand for China as a big economic power.

It says that the central bank will try to keep the yuan stable in the fourth quarter, step up the construction of the foreign exchange market and offer new foreign currency-related products.

It will also further promote foreign trade investment, guide the inflow of foreign exchange funds and expand the channel for capital to flow out of the country in a bid to keep a basic balance of payments.

China on July 21 allowed the yuan to float within a certain range, ending a decade-old fixed peg to the US dollar. However, the Chinese government is still under pressure to go further.