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