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China Eases Up on Forex

"Chinese economic reform philosophy is gradualism" stated the chief governor of the People's Bank of China Zhou Xiaochuan, to a gathering of bankers on the almost annual meeting of the International Monetary Fund and the World Bank. As the chief of China's central bank proclaimed, China is not in a hurry to loosen the Yuan's exchange rate but it did began to walk a path that will lead to a market-oriented evaluation of the Yuan.

The central bank chief admitted that China's forex reserves are a vast and extremely complicated machine but the fact you don't know how to fix it doesn't mean you should take it apart. China has begun freeing her forex regime on the 21st of July, when China abandoned the 10 years old pegging to the dollar and switched to floatation versus a basket of major currencies.

When the central bank chief was asked about how China plans to proceed with the reforms, Zhou said that the weight of the basket will be gradually removed as the Yuan will move towards real floatation. He stated "We are not in a hurry to move forward, but we have this direction". It is definitely going to be interesting to see how China is going to move ahead with its forex reserves and currency regime.

Paul Allen, Editorial Staff. 25th of September, 2005.

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