MW: China’s yuan set for more international role

Big changes could be underway for China’s currency this year, as Beijing moves forward with plans to free up its forex rules and increase the use of the yuan in its trade with the world. Unnerved by the financial crisis in the euro zone, Chinese policy makers are contemplating a new approach that won’t be immediately obvious in the currency charts, according to one analyst. Economist Intelligence Unit’s Asia economist Duncan Innes-Ker in London said the consensus in Beijing is tilting towards efforts to accelerate the internationalization of the yuan — a reform that would also entail a gradual appreciation of the Chinese currency and would bring forward the eventual end of China’s managed foreign-exchange regime. “What you saw last year was the Chinese trying to diversify their foreign-exchange reserves [which are] being savaged by what’s going on in the euro area,” said Innes-Ker. The shift seems to have garnered momentum around the middle of 2011, he said, with an expanded international role for the yuan backed by the Ministry of Finance and the People’s Bank of China, and with the Ministry of Commerce — which has traditionally supported a weak currency to help exporters — apparently losing clout.
MW