Governor fuels speculation over widening RMB exchange

(Xinhua)
Updated: 2007-03-06 13:52

China could widen the floating band of the RMB exchange rate in 2007, Tuesday's China Securities Journal reports.

"This year (China) will not rule out the possibility of expanding the floating band of the RMB exchange rate when necessary," Zhou Xiaochuan, governor of the People's Bank of China, told the newspaper before attending the opening session of the National People's Congress on Monday.

Early last year, Zhou issued a statement saying China would not expand the range in 2006. Monday's words appeared to demonstrate a potential change of policy for this year although he also said, "The floating range is wide enough for current use."

The RMB value has risen more than six percent since July 21, 2005, when the Chinese government launched the reform of the exchange rate system to allow the yuan to float against the U.S. dollar within a daily band of 0.3 percent around the official central parity rate.

"Faced with the ever-changing international and domestic markets, we will further the progress of forex rate reform, making a more flexible RMB exchange rate system," he said.

But Zhou would not be drawn on detailing a time frame for any possible adjustment, saying the timing depended on the supply-demand situation and the state of the global economy.

The RMB exchange rate could appreciate by five percent in 2007, according to a Xinhua Economic Analysis Report, a regular product by a team of more than 80 economic analysts working with Xinhua Economic Information Department, released at the beginning of this year.

The central parity of RMB against the U.S. dollar was 7.7453 yuan per U.S. dollar on March 6, compared with a rate of 8.28 yuan before the reform.