The head of the International Monetary Fund said on Tuesday that now was a “good moment” for China to begin moving towards a more flexible exchange rate because of the strength of its economy.
Rodrigo Rato, the IMF's managing director, said the decision on timing was a question for the Chinese government but argued a flexible exchange rate and more open capital account would help China better cope with external shocks...
His comments come a day after Chinese premier Wen Jiabao said the government would eventually move away from its fixed dollar currency peg, but warned that some countries underestimated the impact a renminbi revaluation would have on Chinese companies and the global economy.
The Chinese premier's comments covered a wide range of issues, but here's the report on the exchange rate bit, from China Daily:
On the question concerning yuan's rate, Premier Wen said that China is working on a plan for a more flexible exchange rate of its currency, but the specific measures might come around unexpected.
China started to reform its exchange rate in 1994 and the work has never stopped. The purpose is to establish a market-based, managed and floating exchange rate, Wen said.
But, as the FT article notes, Mr. Wen cautions against getting carried away.
Wen said there has been no agreement on what impacts the change of China's exchange rate, or the appreciation of Renminbi, will have on the Chinese economy, Chinese enterprises and neighboring countries and other countries in the world.
Frankly speaking, although some people strongly ask for the appreciation of Renminbi, they don't fully understand the problems arising from the appreciation, Wen said.
But don't worry.
China is a responsible country. On the issue of the appreciation of Renminbi and the exchange rate system, China not only considers the domestic interests, but also its possible impacts on neighboring countries and the world, he said.
There is lots of interesting stuff on other topics, so the China Daily article is worth a look if you have a yen to check in on what's happening over there.