Yuan acceleration calls rejected

The head of China's central bank said the yuan was getting closer to its fair value against foreign currencies, rejecting international calls for the country to accelerate the appreciation of its currency.

The market is playing a bigger role in deciding the exchange rate of the yuan, but more time is needed for such a trend for further development.
The central bank set the yuan's central parity rate against the US dollar at 6.3282 on March 12; lower than last Friday's 6.3073 and touching a one-month intraday low.

Beijing and Washington have long disputed their huge trade imbalances, with US politicians and manufacturers accusing Beijing of keeping the yuan's value artificially low to help Chinese exporters.

Jianguang Shen, a chief economist with Mizuho Securities, said he believed the yuan's appreciation would come under less pressure as a result of a declining surplus.

We believe the yuan will appreciate by 3 per cent at most in 2012, and that it is now time to make the yuan exchange rate regime more flexible.

Currency exchange is very important in foreign trade business. For example, an international buyer placed an order on China manufacturer, who may receive 30% deposit amount, and the remainder should be paid after the shipment. But if the production period spanned for more than half a year, the payment will be affected by the currency exchange which may not be easily predicted.

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