Since it was freed from its fixed exchange rate
regime two years ago, the Chinese Yuan has appreciated nearly 9% against
the USD. While the Yuan’s exchange rate is clearly managed by the
Chinese government, many commentators agree that its rise has given off
the aura of a floating currency. One economist thinks China will cement
this perception the conclusion of the Beijing Olympics-to be held in
2008-and allow the
currency to float freely, at which point it could
surge by as much as 10% against the USD. Evidently, China is growing
tired of the lack of control it has over its domestic economy due to its
exchange rate policy and is clearly overwhelmed by the need to continue
growing its forex reserves (which now stand at $1.33 trillion) in order
to control the Yuan. Bloomberg News reports:“They have to adopt a free-float system; it’s not a question of whether they will, but a question of when. After the Olympics, the new leadership will be firmly in place.”
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