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China vows to ease currency controls after US vote

13 october 2011, 11:03
0
Chinese yuan
Chinese yuan
China Wednesday renewed its promise to loosen currency controls, but denied the yuan was overvalued, after US lawmakers passed a bill that would punish Beijing for alleged manipulation of the yuan, AFP reports.

The US Senate on Tuesday defied warnings from Beijing and the White House and approved a measure that envisions retaliatory duties on Chinese exports if the value of the yuan is unfairly "misaligned".

While US claims that the yuan was significantly undervalued were "erroneous", China would continue "reform of the exchange rate formation mechanism and increase the flexibility of the yuan exchange rate", the central bank said in a statement.

In the lead-up to the Senate vote, the yuan hit its strongest level against the dollar since June 2010 when Beijing promised to allow the currency to trade more freely against the greenback.

But on Wednesday the yuan weakened after policymakers set the central parity rate -- the midpoint of the allowed trading band for the yuan -- at 6.3598 to the dollar, compared with 6.3483 on Tuesday.

The yuan is allowed to trade 0.5 percent on either side of the midpoint.

Since June 2010 the yuan has strengthened more than seven percent against the greenback, but this has failed to silence critics in the US and elsewhere who argue the Chinese currency is undervalued by as much as 30 percent.

The People's Bank of China on Wednesday also accused the US of finding "external excuses" for the country's high jobless rate, and said US restrictions on exports to China were one of the main reasons for its trade deficit, not the value of the yuan.

China has repeatedly condemned the US bill and the central bank warned it could "severely harm" trade relations between the world's two biggest economies.

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