China will begin trading eight new foreign currency pairs on
Wednesday, announced China's central bank in Beijing
Tuesday.
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According to the central bank, the expansion of the forex trading
system will not involve the Chinese renminbi (RMB) or yuan. The
following seven currencies will be traded against the US dollar
beginning Wednesday: the euro, Australian dollar, British pound,
Japanese yen, Canadian dollar, Swiss franc and Hong Kong dollar.
The eighth set will pair the euro with the Japanese yen.
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At present, the yuan is paired in trading with four currencies: the
US dollar, Hong Kong dollar, Japanese yen and euro.
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The expansion of the system had earlier led to intense speculation
on whether China would appreciate the yuan on the same day. But the
central bank Governor Zhou
Xiaochuan last Friday denied foreign media reports that alluded
to this. Chinese Premier Wen Jiabao on Monday stressed that China
will never yield to outside pressure for a change to the Chinese
forex system.
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The expansion of China's forex system will improve the market as
between Chinese banks, said an unnamed official with the central
bank.
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Li Yang, director of the Institute of Finance of the Chinese
Academy of Social Sciences, said that an effective forex market is
the prerequisite for any reform of the RMB exchange rate
regime.
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The yuan is currently pegged to the US dollar at a rate of about
RMB8.27 to USD1. China has maintained a unified and managed
floating exchange rate regime based on supply and demand of foreign
exchange in the market since 1994. The yuan appreciated 38 percent
against the US dollar between 1994 and 1997. When the financial
crisis hit Asia in 1997, China insisted on not devaluing its
currency and kept its rate stable.
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With the devaluation of the US dollar in recent years, the RMB
exchange rate against other major currencies has also dropped,
which some foreigners claim was as a measure by the Chinese
government to stimulate its soaring exports market.
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But China did not lower the yuan artificially to pursue its own
interests, the country's former foreign exchange chief Guo Shuqing
said recently.
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Chinese leaders have also said on several occasions that there is
no timetable for exchange rate reform. It is a complicated job and
should be done step by step.
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"When we reform the exchange rate regime, we should take into full
consideration the macro-economic climate, the resilience of the
country's financial system, the performance of the financial
market, and the impact that any reform will have on regional and
global economies," Guo said.??
(Xinhua News Agency May 18, 2005)