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China hints it may let the yuan rise

City A.M. Reporter
CHINA yesterday hinted it may soon let its yuan rise against the dollar, ahead of a state visit by US President Barack Obama.<br /><br />For the last 18 months the US, the European Union and Japan have complained that Beijing deliberately keeps its currency undervalued against the dollar to give its companies an unfair trade advantage that is reflected in America&rsquo;s trade deficit with the Asian manufacturing giant.<br /><br />The International Monetary Fund said at the weekend the yuan, was &ldquo;significantly undervalued&rdquo;.<br /><br />Since 2005 the yuan rose 20 per cent against the dollar, but Beijing has pegged the currency at around that level since the middle of last year. <br /><br />But yesterday the People&rsquo;s Bank of China in its third-quarter monetary policy report said foreign exchange policy would take into account &ldquo;capital flows and major currency movements&rdquo;.<br /><br />This significantly departs from the well-worn language the bank has used over the last year and a half on keeping the yuan &ldquo;basically stable at a reasonable and balanced level&rdquo;.<br /><br />Economists and other observers said the new wording from China&rsquo;s central bank would give it more flexibility but it was unlikely to mean the government would shift policy before the middle of next year, if at all.<br /><br />Scott Paul, executive director of the Alliance for American Manufacturing, said he suspected the People&rsquo;s Bank of China report was aimed at defusing tensions on the currency issue before Obama arrives next week in China for talks.<br /><br />He said: &ldquo;After many years of observing how China proceeds on this, I&rsquo;m reluctant to give them much credit other than making a shrewd political move ahead of Obama&rsquo;s visit.&rdquo;<br /><br />President Obama said he planned to bring up China&rsquo;s currency, &ldquo;along with a host of other issues,&rdquo; when he meets for wide-ranging talks with Chinese leaders in Beijing.<br />