RMB to be given more flexibility

Jul. 9, 2007 (China Knowledge) – China will be taking steps to allow its currency Renminbi (RMB) to trade with more flexibility, Assistant Governor of People's Bank of China, Yi Gang told Xinhua news.

In a forum held on Saturday, the central bank official said that Mainland would improve the RMB exchange rate formation system, corresponding to a joint statement issued during the third EU-China Economic and Financial Dialogue held in Brussels on Wednesday, according to the news agency.  

However, the official did not give a time frame or specific details about the degree to which the trading band would be expanded.

The Chinese currency appreciated 6.65% from the time when it was revalued by 2.1% against the U.S. dollar in 2005, and was released from its peg to the dollar to float freely within controlled bands.

In May, China broadened the daily trading band of the RMB against the dollar to allow a plus or minus 0.5% of the midpoint on the inter-bank market.

The official added that apart from alterations to its RMB exchange rate, China will also implement a series of measures to reduce its exponential trade surplus and curtail excessive liquidity with policies to promote consumption and domestic demand, further opening up the domestic market, increasing imports and encouraging overseas investments.

U.S. politicians have commented that China's RMB is extremely undervalued, giving Chinese goods an unfair advantage in its export industry with detrimental effects on the American economy. U.S. congressman said that they are considering the introduction of legislative measures in retaliation against countries considered to be undervaluing their currencies.