Magazine article Business Asia

US and Europe Call to Dump Yuan Peg

Magazine article Business Asia

US and Europe Call to Dump Yuan Peg

Article excerpt

US companies have complained to lawmakers that China's eight-year policy of fixing the yuan at a rate of 8,2770 to the US dollar gives its companies an unfair edge and fuels a current-account surplus.

The European Union and Japan have all called for China to abandon the peg, which has enabled the yuan to track the dollar's 11 per cent decline against the euro in the past year and hold down the price of Chinese-made products. US Treasury Secretary John Snow said the US would welcome a more flexible exchange rate in China and reiterated that it backs a strong dollar set in free markets.

I'm encouraged from things we're hearing from the Chinese that they're willing to look at widening their peg," Snow says. He says any change should be accompanied by reforms to the country's monetary and corporate governance systems because "those go hand in hand with moving to market exchange rates".

Should China alter its band, the Treasury official says economists expected the yuan to "appreciate some", leading to a "mixed set of effects" for US companies. …

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