China’s yuan hits fresh high

Shanghai, July 3:

China’s currency hit fresh highs against the dollar Tuesday but its slow progress through the symbolic 7.60 level was unlikely to curb the fast-rising exports that rankle its trading partners.

The yuan ended the day at a record high of 7.5937 against the US dollar, up from Monday’s finish of 7.6050, as China’s central bank pledged to continue its policies of gradual reform.

“We should continue to improve the managed floating exchange rate system, make supply and demand play a fundamental role in setting the yuan’s price, and keep it basically stable and at a reasonable and balanced level,” the bank said in a statement.

Dealers played down the importance of the 7.60 level, attributing the outcome to a

confluence of factors linked to the juggernaut growth of China’s economy and the dollar’s poor performance.

The United States and China’s other major trading partners also view the gains in the yuan as far too slow, persistently demanding Beijing quicken the speed of reform of its exchange regime that in turn would slow its exports.

They point to China’s soaring trade surplus — up 83.2 per cent in the first five months of the

year to 85.72 billion dollars — as evidence that the currency is undervalued.

In an effort to rein in the trade surplus that some experts predict could hit 320 billion dollars this year, or 10 times the level of 2004, China earlier this month slashed export tax rebates on more than 2,800 items.