Chinese Premier Wen Jiabao is planning to allow the yuan to increase in flexibility on the currency market, according to
China’s official television reported, over the weekend, that a meeting between US President Barack Obama resulted in Wen’s pledge that China would allow the yuan (also called the renminbi) to appreciate more on the Forex market, moving more in line with market pressures.
Even though Chinese President Hu Jintao reportedly pointed out that yuan appreciation would not solve of the problems in the US, many are still calling for more flexibility to the yuan. In any case, the move might be smart for China in the long run.
Many have long suspected that China is ready to step in as a global economic superpower. Indeed, some even believe that China would like to usurp the US dollar’s place as the de facto global currency. Before that can happen, though, China would need that yuan to be more flexible on the currency market.
Pledges not withstanding, the conversion to a more flexible yuan is likely to take some time. Wen says that the change will happen gradually, over time. This is not something that the Chinese are taking lightly, and any appreciation will come slowly.
At 15:09 GMT, USD/CNY is a little higher, at 6.3650, up from the open at 6.3586.
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