Friday

29th Mar 2024

China agrees to gradual increase in value of yuan

  • Modern Shanghai: the Chinese central bank on Monday dampened expectations of a rapid rise to the yuan (Photo: stuck_in_customs)

China's announcement that it will allow the yuan to slowly appreciate has been welcomed by the European Commission, although latest signals suggest any rise is likely to be very gradual.

On Monday (21 June), China left the yuan's exchange rate with the dollar unchanged, despite pledging on Saturday to introduce a more flexible currency.

Read and decide

Join EUobserver today

Get the EU news that really matters

Instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

After months of building pressure in the US Congress, and just one week ahead of a G20 leaders' meeting in Canada, analysts have interpreted the pledge as heralding the end of the yuan's two-year old currency peg with the dollar.

A commission statement said the move would be beneficial to both the European and global economy as a whole.

"This implementation of the decision will help achieve more sustainable growth in the global economy, contribute to reduce external imbalances and strengthen the stability of the international monetary and financial system," the EU executive said.

"It will also entail positive effects for the euro area. By enhancing the flexibility of the RMB exchange rate, the Chinese authorities are providing an important contribution to the success of the G20 Toronto Summit."

But Beijing's apparent willingness to dampen expectations of rapid change, as witnessed by Monday's decision to hold exchange rates unchanged, is likely to result in continued external pressure.

US senator Charles Schumer said the apparent lack of implementation of China's new policy stance meant the Congress should push ahead with legislation to redress the balance.

"Just a day after there was much hoopla about the Chinese finally changing their policy, they are already backing off," said the American. "It vindicates our initial scepticism. We intend to move forward as quickly as possible with legislation."

Increased tensions over the currency issue have threatened to result in its discussion at this weekend's G20 leaders' meeting, prompting warnings from Beijing not to raise the subject.

US and European exporters have long complained that an artificially low yuan gave China's manufacturers an unfair advantage, although the eurozone's current debt crisis has seen the single currency fall dramatically this year, providing a badly needed boost to European exports.

Analysts say the eurozone's instability is one factor being studied closely by Beijing as it considers strengthening the value of Chinese currency.

Another is the need to avoid large inflows of speculative capital seeking to benefit off the yuan's rise, something officials feel could destabilise their economic policies.

Yuan appreciation between mid-2005 to mid-2008 saw considerable inflows of money.

Chinese yuan to be convertible with euro by 2015

China is seeking to make its currency fully convertible by 2015, officials said in Beijing, a move which may help the ailing euro and dollar, which are losing against an under-valuated yuan. The Asian country is also looking at expanding its ratings agency to Europe.

US and EU breaking taboos to restrain Israel

The US abstained and all EU states on the UN Security Council backed a call for an "immediate ceasefire" in Gaza, as Europe prepares to also blacklist extremist Israeli settlers.

EU warns Russia over Moscow terror attacks

Europe has warned Russia not to use the weekend's terror attacks in Moscow as a pretext to escalate its war in Ukraine and crackdown on internal dissent.

Opinion

Why UK-EU defence and security deal may be difficult

Rather than assuming a pro-European Labour government in London will automatically open doors in Brussels, the Labour party needs to consider what it may be able to offer to incentivise EU leaders to factor the UK into their defence thinking.

Latest News

  1. Kenyan traders react angrily to proposed EU clothes ban
  2. Lawyer suing Frontex takes aim at 'antagonistic' judges
  3. Orban's Fidesz faces low-polling jitters ahead of EU election
  4. German bank freezes account of Jewish peace group
  5. EU Modernisation Fund: an open door for fossil gas in Romania
  6. 'Swiftly dial back' interest rates, ECB told
  7. Moscow's terror attack, security and Gaza
  8. Why UK-EU defence and security deal may be difficult

Stakeholders' Highlights

  1. Nordic Council of MinistersJoin the Nordic Food Systems Takeover at COP28
  2. Nordic Council of MinistersHow women and men are affected differently by climate policy
  3. Nordic Council of MinistersArtist Jessie Kleemann at Nordic pavilion during UN climate summit COP28
  4. Nordic Council of MinistersCOP28: Gathering Nordic and global experts to put food and health on the agenda
  5. Friedrich Naumann FoundationPoems of Liberty – Call for Submission “Human Rights in Inhume War”: 250€ honorary fee for selected poems
  6. World BankWorld Bank report: How to create a future where the rewards of technology benefit all levels of society?

Join EUobserver

EU news that matters

Join us