Chinese authorities may adopt a flexible policy in managing the exchange-rate issue next year, a market watcher said.
"Chinese authorities may loosen its foreign exchange policy, leading to moderate revaluation of the Chinese yuan next year within a range of between 3 percent and 5 percent," Cheng Cheng-mount (
If China continues to see its economy growing between 8 percent and 10 percent annually in the next five to 10 years, there could be space for revaluation by up to 50 percent, Cheng added.
Cheng's remark came after the International Monetary Fund last week warned China that the cost of maintaining its fixed-currency regime was mounting and argued for a widening of the trading band on the yuan by 10 percent to 15 percent to stave off pressure on its giant exploding economy.
Undervalued
The Chinese yuan, which is fixed to the US dollar at between 8.2 yuan and 8.3 yuan since the Asian financial crisis in 1997, is considered grossly undervalued given the nation's strong economic growth over the past few years.
Major importers of Chinese goods including the US, Japan and the EU have been groaning under the weight of cheap Chinese exports.
Thus far, Chinese officials have never set a timetable to widen the trading band. But if Beijing does allow the yuan's revaluation, the Chinese government may become more active in illiciting foreign portfolio funds in their stock markets, in a bid to prevent an outflow of foreign funds, Cheng said.
The Citibank economist however did not encourage China-based Taiwanese companies to trade their shares on China's bourses, considering the lack of information transparency and the poverty in trading regulations there.
To raise more funds, Taiwan businesses should consider listing their shares on the Hong Kong stock market, Cheng said, adding that Taiwan's market is a fine choice as long as the financial authorities relax capital utilization limitations.
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