Beijing, October 24:

China’s currency broke the 7.5 mark to reach a new high today, with a central parity rate of 7.4938 yuan to one US dollar, according to the Chinese Foreign Exchange Trading System.

The yuan, climbing 72 basis points to one dollar from yesterday, rose by 3,149 basis points from 7.8087 yuan on the last trading day of 2006.

Tan Yaling, an expert with the Bank Of China, said a weakening dollar and calls from the US and the Europe that China should allow its currency to appreciate more quickly were ‘short-term reasons’ contributing to the recent rise.

“Speculation ignited by rising expectations of a stronger yuan also led to the continuous appreciation of the Chinese currency,” she said.

The cumulative appreciation since July 21, 2005, when China abolished yuan’s peg to the dollar, has exceeded eight per cent. However, Tan said the move to a more market-valued yuan should be made gradually.

“Currency appreciation was not the key solution to China’s huge surplus, which should be solved through improvement of China’s economic structure over the long term,” she said.