The Chinese government’s decision to slowly allow greater fluctuation between its yuan (renminbi) currency and the U.S. dollar has proven beneficial, as the yuan reached all-time highs against the greenback in late September.
The yuan closed Sept. 28 at 7.8935, an increase of 4.7 percent from the 8.28 level the yuan was pegged at until July 2005. The currency has not traded above 8.00 since mid-August.
The move comes despite restrictions from the Chinese government the yuan can only move 0.3 percent in one day, a limit other countries — including the U.S. — want increased or abolished. Nonetheless, the Chinese remain steadfast in their commitment to a gradual relaxation of yuan policy.
Zhou Xiaochuan, the governor of the People’s Bank of China, told International Monetary Fund and World Bank members that supply and demand would dictate further fluctuation.
However, at the G7 meeting in mid-September, financial chiefs from the group nations released a statement saying greater exchange rate flexibility was necessary for emerging economies with large account surpluses. China has a trade surplus of almost $19 billion.
In Washington, senators were preparing legislation that would impose heavy tariffs on the Chinese if they did not change their yuan policy.
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