(Xinhua)
Updated: 2008-01-02 13:59

China's currency, the yuan, hit a new high against the US dollar on Wednesday, breaking the 7.30 mark to reach a central parity rate of 7.2996 yuan to one dollar.

The yuan, also known as the renminbi, went up 50 basis points from Friday, the last trading day in 2007.

Special Coverage: Markets Watch   Related readings:  Yuan climbs most since China ended dollar link  Yuan hits another new high against dollar

The Chinese currency had appreciated against the greenback by about 12 percent since a new currency regime was imposed in July 2005 to revalue and de-peg it from the dollar.

It had climbed 6.9 percent against the dollar in the past year, but some US critics had said it remained severely undervalued. This gave Chinese exporters an unfair advantage and resulted in the massive trade imbalance between the two countries.

China's trade surplus soared 52.2 percent in the first 11 months of 2007 to $238.13 billion against the same period a year earlier, according to the General Administration of Customs.

Guo Tianyong, director of the banking research center at the Beijing-based Central University of Finance and Economics, said the yuan's rise would help China reduce its massive trade surplus, mop up excess liquidity and curb inflation.

US Treasury Secretary Henry Paulson recognized last month at the bilateral strategic economic dialogue held in Beijing that "the pace of appreciation has increased over the past year".

"I've talked to the Chinese enough that we've agreed we don't talk about how fast is fast. We agree with the principle (of appreciation)."

China was not against revaluation, but opposed "excessively rapid" appreciation that was inappropriate to its national conditions, Minister of Commerce Chen Deming said last month.

Premier Wen Jiabao said China would improve the yuan's exchange rate mechanism in a controllable and gradual manner, let the market play a bigger role in the mechanism and enhance the currency's flexibility.

He said the exchange rate wasn't the only factor leading to the trade surplus. The appreciation had not forced down Chinese exports because of the world's industrial division of labor and the competitiveness of the country's products, he said.