Sun, Oct 30, 2005 - Page 11 News List

Beijing lets yuan creep up, but still keeps tight control

RELUCTANT RELEASE The yuan moved up to 8.084 against the US dollar on Friday, but its appreciation has come only at a glacial speed


Beijing authorities permitted China's currency to inch past a psychologically important benchmark in trading on Friday, but the move only underlined their reluctance to tolerate anything more than a gradual currency appreciation against the US dollar.

The yuan crept up to 8.084 to the dollar on Friday, for a total increase of just 0.32 percent over the 14 weeks since China revalued its currency on July 21. The move was crucial because at the time of the revaluation, Chinese authorities said they would not permit the yuan to rise or fall more than 0.3 percent against the dollar in a single day.

The pace is so slow that, like the 2.1 percent revaluation in July, it has satisfied few critics. Many want to see an appreciation of 15 percent to 40 percent, given the large and widening US trade deficit with China.

"Neither movement is going to have any appreciable effect on the relative prices of US and Chinese goods," said Alan Tonelson, a research fellow at the US Business and Industry Council.

The move Friday may have been linked to remarks from Chinese officials hinting at greater appreciation in the yuan.

Economists and currency strategists said the decision to let the yuan finally breach 0.3 percent proved that China was not using the daily trading limit as a long-term limit on the yuan.

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