Experts
say rise shows market has confidence in Chinese economy
The yuan rose to an 18-year-high on Friday,
climbing as Vice-President Xi Jinping prepares to step onto a plane for his
trip to the United States next week.
The People's Bank of China set the yuan's
central parity rate against the US dollar at 6.2937 after the rate rose for two
consecutive trading days, according to the China Foreign Exchange Trading
System.
"The exchange rate will see more
fluctuations, although the positive outlook for the Chinese economy has sparked
expectations of a strengthening of the currency," said Zhuang Jian, senior
economist with the Asian Development Bank.
Zhuang predicted the yuan may rise about 3 per
cent this year. However, that is slower than the 6 percent against the dollar
in real terms last year.
Deputy Foreign Minister Cui Tiankai said on
Thursday that Xi's visit is an important opportunity to enhance mutual trust
between China and the US.
Cui also expected the visit would help remove
hurdles from Sino-US trade, including restrictions on US exports of certain
high-tech products and obstacles to Chinese investment in the US.
Xi is scheduled to visit the US next week,
where he will meet President Barack Obama and other high-level leaders.
"The rise largely reflects market supply
and demand," said Zhang Jianping, senior economist with the Institute for
International Economics Research under the National Development and Reform Commission.
He said the market expects the Chinese
currency to rise because the economy remains positive and the government has
adopted a rather tight monetary policy.
Il Houng Lee, senior resident representative
at the Beijing office of the International Monetary Fund, said the currency
will go forward over the medium term but in the short term it will see more ups
and downs.
A report released by the IMF's Beijing office
on Monday said upward pressures on the currency have diminished recently.
However, as the current account still has a
sizable surplus of US dollars, and foreign direct investment remains strong,
China is supposed to resume the strong pace of accumulation of foreign-exchange
reserves, according to the report.
The country's foreign-exchange reserves
increased by US$11.7 billion between October and December, regardless of
changes in the exchange rate and asset prices, the State Administration of
Foreign Exchange said on Friday.
China's capital and financial account suffered
a deficit of $47.4 billion in the fourth quarter of 2011, from a surplus of
$66.2 billion in the third, indicating net capital outflows. Analysts said the
exchange-rate fluctuations are closely connected with the crisis-affected
economic scenario overseas and with speculative activities.
Lan Lan
China Daily
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