China's Central Bank Gives The Wink, Wink For Yuan Revaluation

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China’s central bank has changed the vague wording of its latest policy statement, in a similar fashion to what we’ve been used to especially under Alan Greenspan.

It indicates that the country is very likely to resume it’s previous policy for the yuan, which was for a gradual upward revaluation.

Times Online: The People’s Bank of China, the central bank, did not say explicitly that it would allow the renminbi to start to climb again — but conspicuously it omitted to repeat its well-worn language on the subject, which in Beijing’s opaque system can be interpreted as equivalent to a policy change.

In its third-quarter monetary policy report, the central bank departed from its mantra of keeping the yuan “basically stable at a reasonable and balanced level”, which it has repeated at every opportunity for more than a year. Instead, it hinted at a shift from an effective dollar peg that has been in place since July 2008, pinning the currency at about 6.83 yuan to the dollar.

The yuan’s gradual revaluation process was halted due to the economic crisis. Now that the country shows signs of a rebound, they can confidently resume the yuan’s upward path. That’s because regardless of the near-term benefit to exporters, many Chinese are well aware of the fact that gradually revaluing the yuan is in the country’s interest.

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