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Strong Domestic Reaction makes China’s Central Bank backtracks on its statement on Yuan Reform

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China’s Central Bank had released a statement on Yuan Reform seeking to defuse international pressure.The statement which rambled about recovery,BOP,world macro situation,yuan history had a brief line about proceeding with currency reform.Even this one line had the US and IMF praising China for moving ahead to correct the yuan’s depreciated value against the US Dollar.I had written that I would be surprised to see any meaningful appreciation given the European situation and today it seems my suspicions came true.A Strong Domestic reaction against any move to appreciate the yuan has the Central Bank already modifying its statement.Now it talks about a gradual revaluation in order to assuage its domestic audience.There will be no immediate or sharp appreciation of the yuan according to the statement .Note in 2005 when China had

Domestic Reaction towards Central Bank Statement – Yahoo News

However, some Chinese experts and commenters on Internet message boards criticized the announcement as a cave-in to foreign pressure that would ultimately damage China’s crucial export sector.”From an economic angle, the appreciation of the renminbi will have a definite effect on exports, but in terms of politics and macroeconomic policy, it can be seen as a result of the need for balance,” said Zhao Xijun, deputy dean of the School of Finance of Renmin University.

Also writing on the National Business Daily website, economist Ye Tan said the move would pile pressure on exporters already contending with a roughly 15 percent appreciation of the renminbi against the euro, as well as rising labor costs.”China’s exports are unstable and this is having a major impact on the actual economy,” Ye wrote. “Appreciation of the renminbi needs to wait until economic readjustment is certain and China’s domestic demand has truly expanded,” Ye said.On the message boards at the popular portal, commentators vilified the move as a sellout that betrayed long-standing government claims that the exchange rate was not a problem. Some commentaries on there and other forums were quickly removed by censors drilled to stymie criticism of the government or discussion of sensitive topics.

China releases Statement on Sunday in Chinese assuring of no sharp Yuan appreciation

Currency Revaluation to Be Gradual, China Says – NY Times

The Chinese central bank announced Sunday afternoon that any changes in the value of the renminbi would be gradual, in a clear attempt to reassure the Chinese people that a move Saturday evening toward a more flexible currency would not result in a sharp or disruptive change.The central bank, the People’s Bank of China, said Sunday that it was determined to “improve foreign exchange management and keep the renminbi exchange rate at a reasonable and balanced level of basic stability, and safeguard macroeconomic and financial market stability.The statement Sunday was issued only in Chinese and clearly intended for domestic consumption. In contrast, on Saturday evening the central bank took the rare step of announcing almost simultaneously in Chinese and English that it was returning to its practice from 2005 to 2008 of setting the value of the renminbi relative to a basket of currencies and not just linking it to the dollar.


Sneha Shah

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