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China's yuan revaluation applauded worldwide
www.chinaview.cn 2005-07-22 13:07:11

     BEIJING, July 22 (Xinhuanet) -- Countries around the world welcomed on Thursday the Chinese government's decision to raise the value of its currency yuan by 2.1 percent and to replace its fixed peg to the US dollar with a tie to a basket of currencies.

    The People's Bank of China, China's central bank, announced it would trade its currency at a rate of 8.11 to the US dollar starting 19:00 (1100 GMT) Thursday, and the yuan to US dollar pegging system is switched to a basket of foreign currencies.

    Over the past few years, the Chinese yuan has been pegged to the US dollar at the rate of one dollar for 8.27 yuan.

    The move was immediately applauded by countries, especially the industrialized ones, around the world.

    US Federal Reserve (Fed) Chairman Alan Greenspan welcomed China's decision to move to a more flexible currency system, calling it "a good start."

    In his testimony on the mid-year US economic situation before the US Senate Banking Committee, Greenspan said that "This is certainly a good first step. ... I think it is a good start."

    The White House also welcomed the move by the Chinese government. "We are encouraged by China's announcement today that they are adopting a more flexible market-based currency system," White House spokesman Scott McClellan said.

    Hailing the decision as China's first step toward globalizing its economy, Japanese Chief Cabinet Secretary Hiroyuki Hosoda saidJapan respects the move by the Chinese government.

    "It must be the conclusion of the Chinese government having considered various things. We pay our respects to that," the top government spokesman said.

    Canada also welcomed the Chinese government's decision. "It remains to be seen exactly how the new system will work and how much flexibility it will provide. But this is an encouraging firststep," its Minister of Finance Ralph Goodale said in a statement.

    "Germany welcomes the move," German Finance Minister Hans Eichel said in a statement. The move could help China achieve more balanced growth as the higher yuan exchange rates increase domestic purchasing power and stimulate imports. "The German economy could also profit from this," he added.

    The willingness of the Chinese central bank to undertake further adjustments if economic and financial developments make this necessary is also positive, the minister said.

    French Finance Minister Thierry Breton said that he is "delighted" by China's decision to revalue its currency and welcomed the move as "positive" for China's economy and the euro zone.

    "It's a positive adjustment for the Chinese economy but also for the euro zone," Breton said in a statement.

    "This development, which responds to the wishes of the countries of the G7, is liable to strengthen the financial stability of the world economy," the statement said.

    The Organization for Economic Cooperation and Development (OECD) also hailed Thursday China's decision to abandon the yuan's fixed peg to the US dollar and replace it with a managed float based on a basket of currencies.

    "The OECD applauds this measure as an important step towards giving China's economy the flexibility needed to support rapid and sustainable growth and continued integration with the world economy," OECD Secretary General Donald Johnston said in a statement.

    US markets reacted strongly Thursday after China said it ended the decade-old peg to the dollar and let the yuan fluctuate versusa basket of currencies.

    The move could push up the price of Chinese exports to the United States and Europe.

    In early New York trading, the yen and euro rose sharply against US currency. The dollar was buying 110.75 yen at 8:45 a.m., down from 112.91 late Wednesday, and the euro rose to 1.2193dollars from 1.2138 late Wednesday.

    European shares also got a boost on Thursday on the news, whichhas raised hopes of a spur to the demand for European products.

    Analysts said the yuan move was positive for miners, luxury goods firms and selected stocks such as the Asia-focused bank Standard Chartered.

    In Frankfurt, German shares rose on the day, led by exporting stocks which were boosted by news that China has appreciated its currency, with the DAX index gaining 45.37 points to end the day at 4,829.87. Enditem

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