China widens currency's fluctuation vs. dollar
BEIJING
(AP) — China announced on Saturday a modest easing of exchange rate controls
that have been criticized by Washington and other trading partners, adding to a
flurry of reform initiatives aimed at making its slowing economy more efficient.
The
range in which the tightly controlled yuan is allowed to fluctuate against the
dollar each day will double in size, though to a still relatively narrow 2%.
The
move was widely expected after Premier Li Keqiang promised in an annual policy
speech last week to give market forces a "decisive role" in
allocating credit and other resources in the state-dominated economy.
The
ruling Communist Party says it wants to inject more competition into the
economy and nurture self-sustaining growth based on domestic consumption
instead of trade and investment.
In
a steady drumbeat of recent changes, authorities also have announced plans to
create China's first privately financed banks and promised to ease the tax and
regulatory burden on entrepreneurs.
Widening
the trading band will help to "optimize the efficiency of capital
allocation and market allocation of resources to accelerate economic
development," the central bank said in a statement.
The
U.S. Treasury Department had no immediate reaction to the announcement.
China's
rapid economic growth tumbled to a two-decade low of 7.7% last year. This
year's official growth target is slightly lower at 7.%, but Li said this week
Beijing will be flexible about it as long as the economy generates enough new
jobs.
Washington
and other governments complain Beijing suppresses the value of the yuan,
unfairly making Chinese exports cheaper abroad and hurting foreign competitors.
The
relatively small size of Saturday's change appeared unlikely to mollify Beijing's
foreign critics. Some U.S. lawmakers have demanded punitive tariffs on Chinese
goods if Beijing failed to ease controls, but the White House has resisted
imposing sanctions.
Beijing
reported a $260 billion global trade surplus last year, a $30 billion increase
over 2012 and among the largest ever recorded by any country.
Chinese
leaders say they plan eventually to let the yuan float freely, but private
sector analysts say that might be decades away.
Beijing
is reluctant to allow big changes in the currency for fear of hurting exporters
that employ millions of workers. But analysts say they might have gained
confidence from recent strong trade performance.
Allowing
the yuan to rise in value would increase the buying power of Chinese
households, helping to achieve the ruling party's goal of nurturing more
sustainable economic growth based on domestic consumption instead of trade and
investment.
A
stronger yuan also could help to suppress pressure for politically sensitive
consumer prices to rise by making imports cheaper.
Reform
advocates say that by suppressing the yuan's value, Beijing has been forcing
even poor households to subsidize exporters.
In
recent weeks, the central bank has been guiding the yuan's exchange lower
against the dollar in what analysts said was an effort to discourage
speculators who are moving money into China to profit from the currency's rise.
Reader's Opinion :
Suhartadi Ramadhani16210717
4EA10
China has been known to manipulate
its currency and it has been criticized by Washington and other trading
partners because Beijing suppresses the value of the yuan and unfairly making
Chinese exports cheaper abroad and hurting foreign competitors. And
the government thinks that “if currency manipulation is so great for exports,
why don’t we do it?”
Allowing the yuan to rise in value
world increase the buying power of Chinese households helping to achieve the
ruling party's goal of nurturing more sustainable economic growth based on
domestic consumption instead of trade and investment and a stronger yuan also
could make imports cheaper. But doesn’t that mean all the things which have
involved poor households are for ruling party’s sake? Is it fair for those poor
households? In conclusion, they need to stop manipulating their currency.
Source of article :
http://www.usatoday.com/story/money/markets/2014/03/15/china-currency-yuan-dollar/6473135/
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