Assessing China’s Forex Regime Change

A year ago, China adjusted the yuan by 2.1% versus the dollar and allowed it to float within tight bands. Still, US economists believe that the yuan remains grossly undervalued and want it to be able to float more freely. The US trade deficit with China hit $202 billion last year, perhaps largely due to the yuan being so undervalued. Wei Benhua spoke at a press conference in Paris earlier today and indicated that China still
needs more time to assess the yuan reform. According to Wei, via the Gulf Times, the management of forex reserves are carried out under three guidelines:

First is to maintain the liquidity of reserves. We need to have liquid reserves. The second principle is the safety of our reserves — we want to be very secure. The third is profitability. After you meet the first requirements, you want as much profit as possible.

Read more: China needs time to assess forex reform, official says