The People's Bank of China announced on Saturday it is widening the yuan's trading band against the dollar from 0.5 percent to 1 percent in a move analysts say shows Beijing is confident the renminbi (RMB) is reaching equilibrium.
The move, which will take effect Monday, is aimed at meeting demands from the international community that China becomes more transparent and flexible with its exchange rate policies. It also follows numbers released Thursday indicating China's slowest first-quarter growth in three years.
China's gross domestic product expanded 8.1 percent year-on-year in the first three months of 2012, slower than the fourth quarter's 8.9 percent increase, the National Bureau of Statistics said Friday. The results surprised economists, who expected a slowdown in growth only to 8.4 percent. The World Bank also trimmed its 2012 growth estimate for China on Thursday from 8.4 to 8.2 percent.
"In view of the domestic and international economic and financial conditions, the People's Bank of China will continue to fulfill its mandates in relation to the renminbi exchange rate, keeping renminbi exchange rate basically stable at an adaptive and equilibrium level based on market supply and demand with reference to a basket of currencies to preserve stability of the Chinese economy and financial markets," a statement by the central bank said.
IMF Managing Director Christine Lagarde welcomed the move Saturday in a statement, saying, "this underlines China's commitment to rebalance its economy toward domestic consumption and allow market forces to play a greater role in determining the level of the exchange rate."
by RTT Staff Writer
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