Yuan to fluctuate, won't need revaluation
China's exchange rate should fluctuate more widely in time, so authorities do not plan another one-off revaluation like the one carried out in July, senior Chinese financial officials said on Friday.
The comments confirmed what market analysts, trying to discern China's new forex policy, had suspected: that the yuan, also called the renminbi, would gradually be allowed to move in much larger ranges than the tiny ones seen since the revaluation.
"In line with the change in control method, the range of the renminbi's exchange rate fluctuation should expand," assistant central bank governor Ma Delun said.
Speaking at the World Economic Forum in Beijing, Ma ruled out a repeat of the July 21 revaluation because the yuan was now managed with reference to a basket of currencies.
"So there is no need to rely on administrative adjustments," he said.
Since July's 2.1 percent revaluation set the exchange rate at 8.11 to the dollar, the yuan has strengthened to 8.097 as of mid-day on Friday. Daily fluctuations are minute compared to fully liberalised currencies, but are larger than what was allowed before the policy shift.
The modest changes are in keeping with Beijing's goal of keeping the currency "basically stable", a point repeated by Finance Minister Jin Renqing on Friday.
"A stable renminbi will be good for China's economy," Jin told a news conference at a meeting of finance officials from the 21-member Asia-Pacific Economic Cooperation (APEC) on the South Korean island of Cheju.
"It is also good for Asia's economy and for the world economy. Our reform will be carried out in a gradual and controllable way," Jin said.
In Beijing, Ma stressed that referencing a currency basket was not the same as tying the yuan to a basket. Repeating the central bank's mantra, he said the central bank would respond to supply and demand in order to keep the currency basically stable.
Ma also said China had made no changes to the way it managed its foreign currency reserves since the revaluation, and the move had not prompted the country to sell U.S. Treasury bonds.
Answering questions after his speech, he referred to worries that China would sell U.S. Treasury bonds, which have helped to finance the United States' current account deficit.
"We will not do that," Ma said.
He said the guiding principles of China's foreign exchange management remained unchanged. These were security first, liquidity second and the possibility of making money third.