China rejects faster yuan rise

| March 14, 2011 | 0 Comments

Chinese Premier Wen Jiabao said today his Government can control stubbornly high inflation and rejected any changes to its tightly managed currency, the yuan.

Last week, China’s National Bureau of Statistics (NBS) revealed inflation rose 4.9% in February on an annual basis – the same figure as January.

It remains well in excess of the 3% target set by the Government and was higher than analysts forecasts of 4.7%.

However, the Government has introduced measures to deal with double-digit food price inflation and the measures appear to be working after the rate held steady.

The People’s Bank of China has already lifted interest rates three times in four months in order to curb high inflation.

However, many analysts have suggested that by allowing the yuan to strengthen against the US dollar, imports will become cheaper, therefore reducing costs.

Tensions between the US and China are ongoing after the US has previously expressed dissatisfaction that China is keeping the value of the yuan low to help its exporters at the expense of overseas competitors.

Trade groups have argued that the yuan, also referred to as the renminbi, is kept up to 40% below what its value should be against the US dollar.

However, Beijing has warned that a sudden appreciation in the value of yuan may be harmful to the Chinese economy and keeping the currency stable is “an important contribution” to global recovery.

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