China will allow the yuan to be more expensive against the dollar

China announced this week that will adopt a more flexible policy about the exchange rate of the yuan, and will allow a moderate revaluation against the dollar.

The decision announced by surprise also shows that the appreciation allowed by Beijing will be gradual.

“Given the recent economic situation of national and international markets, the Popular Bank of China decided to advance the reform on exchange rates of the renmimbi and increase the flexivility of exchange rates”. Said the central bank in a communicate.

In the text spread by Internet, the president of the Popular Bank of China, used the word “renmimbi”, that means currency of the people, instead of using “yuan”.

The declaration from the Chinese monetary authority is very different from recent expressions of the Government, that negated modifications on their monetary policy about exchange rates of the yuan and apposed against international pressures from countries believing that Beiging is keepig the yuan artificially low to help their exportations.

China won’t speak about the yuan

Some members of Chinese Government that will travel with the president, Hu Jintao, to the meeting of the G20 in Toronto next weekend, said last Friday that revaluation of the yuan wouldn’t be discussed there, “because it isn’t an international matter, but of Chinese sovereign”.

According the Popular Bank of China, because the world economy is in process of recovery, “is desirable” to advance in the reform of exchange rates, but also pointed that hasn’t arrived the moment of a big appreciation of renmimbi.

Beijing revalued the yuan in 2005 after years of being fixed at 8.2 yuans per dollar, during the next years, led id go up by 21% respect the dollar.

In July of 2008, fixed the new parity at about 6.8 yuans and then left the yuan without modifications due to the international financial crisis.

The United States celebrated the decision of the Popular Bank of China immediately, and the Secretary of the Treasury, Timothy Geithner, affirmed that the decision of increase the flexibility of exchange rate of the yuan can contribute positively to a bigger and more equilibrate economic growth.

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