Updated: 2005-07-27
The central bank yesterday denied there would be further appreciation of the Chinese currency, saying last week's 2 per cent revaluation did not mean more adjustments.
The People's Bank of China (PBOC) also said that foreign media reports describing the long-awaited move as an "initial adjustment" to the exchange rate were incorrect.
The 2 per cent appreciation refers to an adjustment at the beginning of reforms of renminbi, or the yuan's exchange rate determination mechanism, a PBOC spokesman said.
"It does not mean that there will be further revaluation (of the yuan) afterwards," he said.
It is an "important principle" of the yuan's reform to be conducted "step by step", which refers to the gradual process in the reform of the rate's determination mechanism, instead of its level, he stressed.
The spokesman said the 2 per cent appreciation level was calculated based "on a rational equilibrium".
The new level of 8.11 to the dollar, up from the virtually fixed rate near 8.28 that had held for the previous eight years, reflected the equilibrium level - the rate that balances supply and demand, driven by the fundamentals of the economy. The central bank said the size of the revaluation was based mainly on what was needed to adjust the trade surplus.
Some developed countries, including the United States, argued that the yuan was artificially low, giving Chinese exporters an "unfair" trade advantage.
Last week, China raised the value of the yuan and scrapped the currency's peg to the US dollar, swinging to "referring to" an unrevealed basket of currencies in setting the yuan's trading price.
The PBOC spokesman said a small number of overseas media have misunderstood China's exchange rate reform, especially the adjustment of the yuan's value against the dollar.
They even "wrongly" believe that the 2 per cent appreciation of the yuan is just an initial adjustment, "which will trigger expectations of further rate hikes," he said. The media should keep a "responsible" attitude towards their reports, he added.
