The yuan’s sudden fall could signal a policy shift to prop up exports during the financial crisis, analysts said yesterday, after the biggest one-day decline since it stopped being pegged to the US dollar.
The fall in the yuan’s value on Monday came just before the US and China hold high-level economic talks in Beijing at the end of the week.
The yuan’s value has been a sensitive issue in the past between China and the US, which has accused Beijing of deliberately keeping its currency low to protect the competitiveness of Chinese export prices.
“It is the best timing for the yuan to start depreciating,” said Lu Zhengwei, a Shanghai-based economist with Industrial Bank.
“The slowdown in China’s economy is clearly intensifying, the export sector is suffering the coldest winter in the past five years,” Lu said.
The dollar-yuan central parity rate continued to rise yesterday to 6.8527 yuan to US$1 after Monday’s dramatic rise to 6.8505 from 6.8349 on Friday.
“I think it could be interpreted as a shift in policy stance and this trend should carry on into mid-2009,” Lu said.
Some experts said Beijing could be trying to gauge the market’s reaction before deciding on a weaker yuan policy.
“It’s too early to say whether the central bank will shift its policy,” said Ma Qing (馬青), a Beijing-based analyst with the CEB Monitor Group.
“But internally China does urgently need to devalue the yuan because of the poor manufacturing figures and ailing export sectors,” he said.
Chinese experts have said any US move to raise the currency issue at the dialogue could be repulsed by Beijing.
They said China wanted the meeting to focus on containing financial turmoil that first erupted in the US, and on reigniting global economic growth.
On the over the counter market, the dollar ended at 6.8848 Monday, down 499 points from 6.8349 — the yuan’s largest single day change since its peg to the dollar ended in July 2005, Dow Jones Newswires data showed.
The previous record had been set on Sept. 26, when the dollar moved 348 points against the yuan.