Premier Wen Jiabao pledged to US President Barack Obama that China will increase the flexibility of fluctuations in its currency, the official China Central Television reported.
China will push forward yuan reform in an active, gradual and controllable manner, the television station cited Wen as telling Obama on Saturday in Bali, Indonesia. China is closely monitoring changes in the yuan?s exchange rate, the report said.
Policy makers in the world?s second-largest economy have pledged to adjust the nation?s growth toward domestic demand and narrow its external surplus to help address lopsided flows of trade and investment that contributed to the global financial crisis of 2008.
The comments probably do not signal an imminent widening of the yuan?s daily trading band, but they underscore Beijing?s intention to introduce two-way fluctuations in the yuan to dampen expectations that China?s currency could only appreciate.
Unbalanced trade flows have triggered calls from the US and other Group of 20 nations for China to allow its currency to trade more flexibly.
Pointing to recent bets in overseas markets that had caused the yuan to hit the bottom end of its trading band a number of times, Wen said such fall in the yuan ?could not have been engineered.?
?China will continue to closely monitor the yuan?s trading movements … and will strengthen yuan?s trading flexibility in either direction,? the premier was quoted as saying in an evening news bulletin on the state broadcaster.
Chinese President Hu Jintao told Obama at a November 12 meeting that a large appreciation won?t solve US problems. During a trip that began November 11 in Hawaii, Obama announced steps to expand trade and military cooperation with Asia-Pacific nations that share US concerns over China?s currency and intellectual property policies and territorial claims.
The yuan is allowed to fluctuate 0.5% on either side of the daily fixing rate set by the central bank. China?s yuan has appreciated 4.13% against the dollar this year, according to Bloomberg data, the best performance of 10 Asian currencies tracked by Bloomberg.
Obama?s meeting on Saturday with Wen was on the final leg of the president?s Asia-Pacific journey that also included a stop in Australia.
Some analysts and traders have argued that the central bank has been laying the groundwork for a widening of the trading band, which would allow China to say in the face of renewed US pressure over the yuan that it is indeed moving ahead with reform to loosen its grip on the currency.
The non-deliverable forwards market reflected expectations of a depreciation since the end of September, which is the market?s reaction to the yuan?s exchange rate rather than an artificial move, Wen told Obama, according to the report.
The currency will climb 4.3% to 6.08 per dollar in Shanghai by the end of next year, according to the median estimate of 18 analysts surveyed by Bloomberg.
?The US welcomes China?s commitment to increase yuan flexibility, Gary Locke, the US Ambassador to China,? said November 18 at a conference in Beijing.