The Yuan Has Peaked, It Won’t Rise Any Further: Chinese Premier Wen
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Chinese Premier Wen Jiabao has said that the yuan is reaching its equilibrium peak, hinting that there would not be further appreciation of the currency, much to the dismay of the United States.
Speaking at the closing of the 2012 National People’s Congress, also the Premier’s last address before he steps down, Wen suggested that the rise of the yuan has ended.
Referring to the yuan’s 30 percent real gains over the last 7 years, Wen said:
Chinese Premier Wen Jiabao has said that the yuan is reaching its equilibrium peak, hinting that there would not be further appreciation of the currency, much to the dismay of the United States.
Speaking at the closing of the 2012 National People’s Congress, also the Premier’s last address before he steps down, Wen suggested that the rise of the yuan has ended.
Referring to the yuan’s 30 percent real gains over the last 7 years, Wen said:
[quote] That shows that the yuan exchange rate may have possibly reached an equilibrium exchange rate. [/quote]Related News: Yuan Picking Up, Trading Near 3 Year High
China’s trade account revealed a surprise $31.5 billion deficit in February; a number that analysts say could be the latest sign of economic slowdown in the world’s second largest economy. Other commentators surmise it could be an indication that the yuan has finally reached its fair exchange rate.
Related News: China Posts A $31.5 Billion Trade Deficit, Adding To A Slew Of Bad Economic Data
The United States has long accused China of currency manipulation, saying that a weak yuan boosts Chinese exports but at the expense of China’s biggest trade partners such as the United States and Europe.
However, Wen added that China is open to adopting a more flexible, market-based exchange rate system, highlighting the government’s push for ‘relatively big-scale’ two-way fluctuation for the yuan. He cited two-way currency movements in Hong Kong, where Beijing has experimented allowing the currency to be freely traded.
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Addressing the challenges ahead, Wen spoke of the risks of another chaotic ‘Cultural Revolution’ if ‘urgent’ reforms were not implemented:
[quote] We must press ahead with both economic structural reform and political structural reform in the leadership system of our party and country. Without a successful political structural reform, it is impossible for us to fully institute economic structural reform, and the gains we have made in this area may be lost. Such historical tragedy as the Cultural Revolution may happen again. [/quote]
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