China refuses from rigid fixation of the Yuan towards the dollar

On June 19, 2010 the representatives of the People's Bank of China have reported on the changes in monetary policy aimed at further gradual rejection from the rigid rate of the Yuan to the dollar.


Recall would like to remind that the authorities in a number of leading world economies (especially the U.S.A.) have advocated for a long time the requirements to China to move to the floating rate of the national currency. In accordance with the generally accepted view among the economists, in the recent years China has been supporting the undervalued Yuan rate to the US dollar, thereby increasing the competitiveness of their exported goods in the external markets.

However, we believe that the decision of the People's Bank was due not so much to external pressure, but due to the desire to gradually change the pattern of growth of national economy, having reduced its dependence on exports and increased the role of domestic consumption in economic growth. In addition, it can be assumed that the strengthening of the Yuan against the US dollar will not be fast and can take from several months to a year. In other words, this trend may provide a significant impact on the global economy only in the long term.

P.V. Trunin, Ph.D., Economics, Head of Laboratory for Monetary and Credit Policy