ASSESSMENTS

China: A Symbolic Move on the Yuan

Jun 21, 2010 | 19:16 GMT

FREDERIC J. BROWN/AFP/Getty Images

Summary

China's central bank announced June 19 that it is ready to allow more flexibility in the country's exchange rate. This statement, along with a small appreciation in the yuan June 21, seems to indicate that China has broken the yuan's two-year de facto peg to the U.S. dollar. China intends to move gradually so as to maximize the political benefits and minimize the economic risks of currency appreciation. While substantial movement in the coming weeks and months may reduce frictions with the United States, it will not resolve the underlying disagreement.

China is making gradual moves in its yuan policy to appease the United States without creating turmoil in the Chinese economic and political landscape....

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