Snow to Push for Wider Yuan Exchange Rate Band
US Treasury Secretay Snow is quietly pushing for the
Chinese yuan, now pegged at 8.27 to one US dollar, to
trade within a wider range against the dollar. The National
Association of Manufacturers, the US's leading lobbyist
for manufacturers, is pushing for this policy.
China now holds more than 121.7 billion dollars in US
Treasuries, and the US trade deficit for the month of
May was 9.9 billion dollars. Faced with this deficit and
and more manufacturing related jobs going out of the US
to Chinese factories, Washington is anxious to get China
to raise the value of the Chinese yuan against the US
dollar.
The IMF's
position is that there is no need for yuan appreciation.
However, for its own reasons,
China has resisted pressure to float. If the Peoples'
Bank (China's central bank) does allow the yuan to float
against the dollar within a wider trading range as proposed
by Snow, it is not likely to be widely announced.
But, the new administration of Hu Jintao and Wen Jiabao
has been showing signs of being more conservative and
protective of state-owned enterprises, many of which are
technically insolvent. However, since they employ large
numbers of people, shutting them down would potentially
contribute to social unrest. Translated into exchange
policy, this will mean that China is more reluctant than
ever to allow the yuan to float, or trade in a wider band,
against the dollar.
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