C. bank official: Reform key to Chinese currency
(Xinhua)
Updated: 2005-12-25 20:50

Yuan has been a top dancer drawing eyeballs from fund clubs to kabob stand tables. Rumors are cooking and speculations mushrooming while he said the key to the Chinese currency lies on reform.

Chinese 100-yuan notes. [AFP]

"Flexibility and fluctuation are the 'key words,' instead of revaluation," he, a central bank official related, told Xinhua Friday on condition of anonymity.

China on July 21 reset the yuan's value at 8.11 to the dollar, a 2.1 percent appreciation from the pegged level where it had been held since 1995, and started managing its value against a basket of currencies including the euro and yen.

The yuan has since fluctuated some 400 base points, closing at 8.0775 to the dollar Thursday, up 325 base points from July 21.

"400 is a lot," he said, "and the next is to improve the market mechanism."

A recent central bank meeting on monetary policies reiterated that efforts should be made to let market supply and demand play a "fundamental" role in the determination of yuan's value, and speed up the development of domestic foreign exchange market.

A new mechanism should be built to allow market forces to set the currency's value, said a report issued after the meeting.