Currency confusion

The de-pegging of the yuan to the US dol- lar last week has created a misunderstanding that has to be cleared.

First, the central bank's announcement should be seen as an important step toward a more flexible exchange rate, and not as a significant revaluation of the yuan. In fact, there will be no one-off revaluation of the yuan.

The announcement is only a reaffirmation of the exchange rate principles China has been following since July 2005, when the yuan was first de-pegged to the greenback. The yuan was re-pegged to the dollar in mid-2008, but only to tide over the global financial crisis. China will stick to its policy of de-pegging the yuan to the dollar.