China's central bank tried yesterday to dampen expectations that it might let the yuan rise quickly in value, saying any changes will come gradually following the decision to break the currency's link to the US dollar.
A statement issued by the bank denied what it said were mistaken news reports suggesting that the government might increase the state-controlled exchange rate of the yuan.
"Gradualism is one of the important principles in the yuan exchange rate mechanism reform," the statement said.
"Gradualism is aimed at the gradual reform of the yuan exchange rate mechanism, not at the gradual adjustment of the level of the yuan exchange rate," it said.
The government's move last week abandoned the yuan's decade-old link to the US dollar and switched to a more flexible system based on a basket of foreign currencies. The government also increased the yuan's value by about 2 percent against the US currency.
The yuan's daily movement is restricted to a 0.3 percent band against that basket. But economists say that over time, it could allow the yuan to strengthen by 10 percent to 15 percent against the dollar.
The central bank statement didn't give any indication of how much the currency might be allowed to rise.
The yuan opened trading yesterday on China's small, tightly controlled foreign-exchange market at 8.1097 to the dollar, up slightly from its level of 8.1111 at the start of trading on Monday.
Also yesterday, the main Communist Party newspaper said the size of the revaluation last week was determined by China's trade surplus and the ability of its companies to adjust.
The report by the People's Daily added to official comments that the change was based on China's economic needs, not pressure from the US and other trading partners.
"The scope of the 2 percent increase in value was excellent," the People's Daily said.
"This whole scope was determined by our country's trade surplus and needs to adjust, while at the same time considering domestic enterprises' ability to adapt," the paper reported.
It didn't give any more details.
But foreign news reports on Monday said Chinese leaders considered an initial increase of 5 percent in the yuan's value before deciding on 2 percent after lobbying from ministries worried about the impact on China's exporters.
US and other foreign companies say the yuan is undervalued by anywhere from 15 percent to 40 percent, giving Chinese exporters an unfair price advantage. US lawmakers had threatened to impose punitive tariffs if China didn't raise the yuan's value.
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