China raised deposit reserve ratio
(AP/chinadaily.com.cn)
Updated: 2006-07-21 19:37
Chinese officials say they plan eventually to let the yuan trade freely on
world markets but say there are no plans for sharp increases in the exchange
rate.
Under the current system, the yuan is limited to moving 0.3 percent above or
below a daily rate set by the central bank based on the previous day's trading.
But daily moves in Shanghai's foreign exchange market have been far smaller.
Some economists suggested this week that Beijing could let the yuan rise
faster by widening the trading band to 1 percent.
The central bank has recommended adopting a more flexible exchange rate
system, warning that the flood of money flowing into the economy from China's
export boom could add to inflationary pressure.
China's trade surplus hit a new monthly high of US$14.5 billion (euro11.5
billion) in June. Its global trade surplus tripled last year to US$102 billion
and Chinese experts say it is expected to top US$100 billion again this year.
The government also has tried to ease pressure on its small foreign exchange
markets by creating new channels for Chinese companies to move money abroad for
investment.
On Friday, the government said three banks have been granted the first quotas
under a program that is to allow Chinese institutions to convert yuan into
foreign currency to invest in securities abroad.
Bank of China Ltd., Industrial & Commercial Bank of China Ltd. and Bank
of East Asia Ltd. were approved to obtain a total of US$5.3 billion for
investment, the State Administration of Foreign Exchange said on its Web
site.
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