China widened the yuan’s trading band for the first time since 2007 as speculation on currency gains declined and to fend off pressure from trading partners for faster appreciation.
The increase to 1 percent from 0.5 percent will take effect tomorrow, the People’s Bank of China said on its Web site yesterday. The previous broadening of the trading band, which is centered on a rate set daily by the central bank, was from 0.3 percent in May 2007.
Expectations for yuan gains dwindled in the past six months as Chinese Premier Wen Jiabao (溫家寶) cut the country’s economic growth target and Europe’s sovereign-debt crisis hurt exports, sparking concern policymakers would curb appreciation. While the yuan reached an 18-year high at 6.2884 against the US dollar on Feb. 10, US President Barack Obama’s administration and US lawmakers argue the currency remains weak enough to give China, the world’s biggest exporter, an unfair advantage in global trade.
Photo: Reuters
“China will avoid significant appreciation or depreciation this year,” Lu Ting (陸挺), an economist at Bank of America Corp in Hong Kong, said after the announcement, citing reasons including an “uncertain” global economy.
The yuan ended this week at 6.3030 per US dollar, up about 8.3 percent since the scrapping in June 2010 of an almost two-year peg imposed during the global financial crisis. Gains have stalled this year and a slowdown in China’s growth combined with official comments that the currency may be near -“equilibrium” are damping expectations for strengthening.
The central bank said yesterday’s move is to meet “market demands,” promote price discovery and enhance the currency’s two-way flexibility. The change improves a managed, floating exchange-rate regime that is based on supply and demand and operates in reference to a basket of currencies, it said.
The monetary authority will keep the currency “basically stable at an adaptive and equilibrium level,” to preserve the stability of the Chinese economy and financial markets, it said.
Twelve-month non-deliverable forwards for the yuan were 0.5 percent weaker than the onshore spot rate on Friday, according to Bloomberg, suggesting that the currency could fall over that period.
Cliff Tan, a currency analyst at Bank of Tokyo-Mitsubishi UFJ in Hong Kong, said yesterday that he was leaving unchanged a forecast for the yuan to reach 6.17 by the end of this year.
The move may mark an early stage of a capital account opening that will be as “momentous” for China as joining the WTO in 2001, Tim Condon, chief Asia economist at ING Financial Markets in Singapore, said in an e-mail.
By increasing two-way exchange rate risk, China can make the currency less attractive as a speculative bet, he said.
The announcement is also a “concrete follow-up” to government statements that the yuan is close to an “equilibrium” level, Condon said.
After keeping the exchange rate stable for a decade, China allowed its currency to strengthen 21 percent from July 2005 to July 2008, including an initial, single-day gain of 2 percent. Appreciation was then halted for almost two years to help exporters weather a global recession.
China could expand the yuan’s trading band to as much as 2 percent, China Business News reported on Dec. 9, citing Chinese Academy of Social Sciences researcher Liu Yuhui (劉煜輝).
A band of 0.7 percent or 0.75 -percent would be appropriate, central bank adviser Li Daokui (李稻葵) said on March 6, adding that this was his personal view.
“Widening the band allows the yuan to be more flexible and addresses the external pressure on yuan appreciation,” said Dariusz Kowalczyk, a Hong Kong-based strategist at Credit Agricole CIB.
Stephen Garrett, a 27-year-old graduate student, always thought he would study in China, but first the country’s restrictive COVID-19 policies made it nearly impossible and now he has other concerns. The cost is one deterrent, but Garrett is more worried about restrictions on academic freedom and the personal risk of being stranded in China. He is not alone. Only about 700 American students are studying at Chinese universities, down from a peak of nearly 25,000 a decade ago, while there are nearly 300,000 Chinese students at US schools. Some young Americans are discouraged from investing their time in China by what they see
MAJOR DROP: CEO Tim Cook, who is visiting Hanoi, pledged the firm was committed to Vietnam after its smartphone shipments declined 9.6% annually in the first quarter Apple Inc yesterday said it would increase spending on suppliers in Vietnam, a key production hub, as CEO Tim Cook arrived in the country for a two-day visit. The iPhone maker announced the news in a statement on its Web site, but gave no details of how much it would spend or where the money would go. Cook is expected to meet programmers, content creators and students during his visit, online newspaper VnExpress reported. The visit comes as US President Joe Biden’s administration seeks to ramp up Vietnam’s role in the global tech supply chain to reduce the US’ dependence on China. Images on
New apartments in Taiwan’s major cities are getting smaller, while old apartments are increasingly occupied by older people, many of whom live alone, government data showed. The phenomenon has to do with sharpening unaffordable property prices and an aging population, property brokers said. Apartments with one bedroom that are two years old or older have gained a noticeable presence in the nation’s six special municipalities as well as Hsinchu county and city in the past five years, Evertrust Rehouse Co (永慶房產集團) found, citing data from the government’s real-price transaction platform. In Taipei, apartments with one bedroom accounted for 19 percent of deals last
US CONSCULTANT: The US Department of Commerce’s Ursula Burns is a rarely seen US government consultant to be put forward to sit on the board, nominated as an independent director Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s largest contract chipmaker, yesterday nominated 10 candidates for its new board of directors, including Ursula Burns from the US Department of Commerce. It is rare that TSMC has nominated a US government consultant to sit on its board. Burns was nominated as one of seven independent directors. She is vice chair of the department’s Advisory Council on Supply Chain Competitiveness. Burns is to stand for election at TSMC’s annual shareholders’ meeting on June 4 along with the rest of the candidates. TSMC chairman Mark Liu (劉德音) was not on the list after in December last