CHINA FREES YUAN

For the first time over past 10 years China revaluated its currency - yuan. In accordance with the new rules, yuan will be connected not only with dollar but, different currencies simultaneously, the People’s Bank of the country announced. However, the announcement does not contain concrete currencies, which the yuan is connected to. For its essence, it consolidates the rate of yuan in regard to U.S. dollar by 2.1% to 8.11. According to Business Week, during the Friday auction the rates of yuan passed this point and was fixed at $8,277 per dollar.

The most world countries complained of artificial cut in exchange rates, which gives considerable priority to Chinese exporters.

The United States, which still accuse China of the U.S. producers’ problems, more actively spoke on this topic.

So, the revaluation of yuan might become the first step in full liberalization of exchange rates of currencies in China.

Stubborn yuan

China fixed yuan-dollar rate in 1994 and China has had to control its interest rates since then through he People’s Bank. Such a policy by the Chinese Central Bank is quite understandable. The countries which find difficult to achieve economic rise or increase of the growth pace of through different measures and which cannot establish quickly efficient market institutions, the maintenance of the national currency lower than the parity of solvency turn out the least available mean for enhancing rise.

The cumulative surplus for 2005 is now nearly $40 billion, more than for the whole of last year. America has long argued that China artificially pegs the yuan below its true market value, so as to give Chinese exports an unfair advantage. The US deficit in trade with China within year might exceed $150bn.

In May US Treasury Secretary John Snow said the yuan's fixed rate of exchange against the dollar risked unbalancing world trade. In June US Federal Reserve chairman Alan Greenspan has added his weight to calls for China to allow the yuan to trade freely against other currencies. Speaking to a conference of central bankers in Beijing via satellite video link from Washington, Mr Greenspan argued that China would also benefit from liberalising the yuan's exchange rate. Mr Greenspan added that China's current system hurt the Chinese economy because it promoted inefficiencies

China has revalued its currency, the yuan, for the first time in a decade, in a move that could placate criticism from abroad, especially the US.

The new rules scrap the yuan's peg to the dollar, and tie it to a basket of currencies, the central bank said.

Wei Benhua, deputy administrator of China's State Administration of Foreign Exchange, told a conference in Beijing that US criticism of China's exchange rate policy was "unfair".

"We cannot accept that," he said.

"We do have a surplus with the United States. However we also have (trade deficits) with many of the European countries and also with the Southeast Asian region. "So how do you manipulate your currency just to get a surplus with the US?" However, yuan was revalued unexpectedly.

Chinese wisdom

One might suppose that the Chinese authorities chose the revaluation of yuan basing on internal economic problems and slight U.S. pressures. China’s big problem is the overheating of economy. Thanks to administrative measures taken over the past few years the government succeeded to cool economy.

Thus, in the day hours official statistics stated on 9.5%-rise in economy in the second quarter of 2005. The growth pace turned lower than the same figure of 2004. industrial production grew 16.8%, while investments in asserts вЂ" 25.4%. The growth pace industry and investments turned out lower than 2003, while it is still strong.

In fact, as some experts urge, the Chinese economy becomes slow in more rapid rates than the official statistics. Judging with physical indicators, such as energy consumption, growth pace of the GDP should fall to 8% in 2006. The leading indicators are profit margins, product prices and property prices, which forecast corporate cash flow or ability to borrow.” These three indicators are slowing. For the past five years, Chinese industrial firms have enjoyed record profit margins as revenue growth has outpaced the increase in wages and raw-material costs. In 2003 and 2004, industrial production and sales grew at an annual rate of nearly 30% in real terms, analysts estimate, but in 2005 the pace has slowed to around 15%. With commodity prices high, companies' margins are being squeezed: overheated industries such as cars, steel, cement and basic materials are suffering especially.

The property prices in China became stabilized after the unusual rise period. Thus, prices of apartments in Chankhai dropped 10-20% from mid-April.

However, the Chinese, is not going to get satisfied with the current deceleration of economy. It seems to take measures not to allow next heating in of economy in future. Expenses for preparations for Olympic Games 2008 to be held in Beijing, can entail rise in investments and put the economy in a new inflation spiral. The establishment of reserves could weaken the negative effects of the coming investment boom.

It is a paradox that China gradually becomes a victim of its growing success in the international arena. Till recent time China was an active locomotive of the world economy, being a fast-growing netto-importer of products of heavy industry. The reverse tendency occurs today: China becomes a netto-exporter of not only textile, but also steel, different metals and chemical substances. It occurs amid rapid rise of export. Thus, in June export by China grew 30.6%, whereas import rose only 15.1% as compared to last year. The slow import actually presents bad information for the international companies, which delivers products to China. On the other hand they are met with aggressive export expansion of Chinese companies in the markets of different countries Thus, China jeopardizes de-stimulating the economic rise and de-stimulating its own growth.

Transition to floating rate might make China more vulnerable to possible world currency crisis. However, the country is preserved by huge gold and currency reserves, which comprise $750bn.

Outcomes for world

Undoubtedly, the majority of developing and industrials countries of the world can take a deep breathe due to a delay in the Chinese export. The developing countries will hope on export of more commodity to the western states. The governments of industrial countries can get relieved from part of a pressures made by the producers and workers, who challenge strengthening the protection measures against the Chinese import. The results of revaluation of yuan can be of dual kind. Firstly, they can cut deficit in trade with China and secondly, the revaluation of yuan will make the Chinese investments in the U.S. state bonds less profitable, making the authorities to transfer the money into asserts nominated in different currencies, for ex., in euro. The last is probable to lead to sharp fall in rates of U.S. dollar and rise of considerable problems for the U.S. government in attracting capital needed for covering trade deficit.

Uzbek-Chinese JV opens tender for calibration of ultrasonic flowmeters
Uzbek-Chinese JV opens tender for calibration of ultrasonic flowmeters
Kazakhstan’s Intergas Central Asia company opens tender for feasibility study dev't
Kazakhstan’s Intergas Central Asia company opens tender for feasibility study dev't
Azerbaijan Tourism Board announces tender for repair work
Azerbaijan Tourism Board announces tender for repair work
Loading Bars
Latest
This visit to Nakhchivan has great symbolic meaning - President Aliyev
President Aliyev warns revanchists in Armenia: They shouldn’t play with fire
Military equipment available to Nakhchivan Army today probably superior to equipment of some advanced countries - President Aliyev
Russian FM visits tomb of National Leader Heydar Aliyev
There is no territorial unit called Nagorno-Karabakh in Azerbaijan - President Aliyev
Iran and Serbia plan to develop trade ties
Azerbaijani, Russian delegations holding meeting in expanded composition
Value of exports from Azerbaijan to UK soars
FMs of Azerbaijan, Russia begin one-on-one meeting
Queen Elizabeth to set out UK government's post-pandemic agenda
Uzbek-Chinese JV opens tender for calibration of ultrasonic flowmeters
Australia's Victoria on alert after first COVID-19 case in two months
Central Bank of Azerbaijan makes allocations to support credit register system
Kazakhstan sees increase in trade with Iran despite COVID-19
Kazakhstan boosts exports to Georgia multifold
Turkey reveals 1Q2021 data on cargo movement via local ports from Russia
Baku welcomes UNESCO mission to assess cultural heritage of Karabakh - Azerbaijani MFA
Iranian currency rates for May 11
Kazakhstan’s Intergas Central Asia company opens tender for feasibility study dev't
TAP to open tender for purchase of gas for fuelling compressor stations
UN says Europe needs more efficient mechanisms to handle migrant arrivals
Amazon raises $1 billion sustainable bond for climate
Latest prices for Azerbaijani oil disclosed
Azerbaijan boosts import of coffee, tea
SOCAR’s Petkim extends time of repaying receivables
Central Bank of Azerbaijan releases 1Q2021 net external assets of local commercial banks
Uzbekistan reveals COVID-19 data for May 11
Turkey unveils volume of goods handled through Bandirma port in 1Q2021
Turkey publishes 1Q2021 data on cargo movement via Izmir port
Number of ships received at Turkish Ambarli port in 1Q2021 revealed
Turkey confirms 13,604 new COVID-19 cases
Kyrgyzstan introduces state regulation of prices for vegetable oil and sugar
Immunization Technical Advisers of Georgia hope WHO to authorize Sinovac
Envoy: Iran supports Afghan peace process
TRACECA Permanent Representative talks cargo traffic growth on Azerbaijani section
Over 610 Palestinians injured in clashes with Israeli police in East Jerusalem - newspaper
Some 20 terrorists killed, 4 bases destroyed in Burkina Faso
WHO records over 677,000 new daily cases of COVID-19 worldwide
Italy reports just over 5,000 new COVID-19 cases, 198 deaths
7 rockets fired from Gaza at Jerusalem area: Israeli military
Saudi Arabia to require arriving visitors to quarantine for a week
Oil prices inch higher as traders eye U.S. pipeline shutdown
Palestinians report several killed in Israeli air raids on Gaza
Biden confident he will meet with Putin
Over 1.6mln receive COVID-19 vaccine in Kazakhstan
Azerbaijan's import of cars from Turkey drops
Iran makes advanced industrial flame arrester
Putin says 21.5 mln Russians vaccinated against COVID-19
U.S. Treasury launches access to $350 billion in state/local COVID-19 aid
President Ilham Aliyev receives delegation led by Russian foreign minister (PHOTO)
Global COVID-19 cases, deaths reach plateau - WHO
Electric, hybrid car sales in Turkey surge over 200% in 4 months
Georgian, North Macedonian Presidents sign visa-free agreement
Second component of Sputnik V vaccine delivered to Kyrgyzstan
Iran produces oil-based ozone generator
India COVID cases hold close to record highs as calls widen for national lockdown
USAID’s focus to remain on modernization of energy sector in Kazakhstan
China-made meteorological satellite for dawn-dusk orbit passes review
Saudi Arabia's GDP contracts 3.3% in Q1 on oil output, non-oil economy recovers
Azerbaijan purchasing new equipment to speed up mine clearance on liberated lands (VIDEO)
Iran's Energy Exchange announces products to be on sale on May 11
Weekly review of Azerbaijani precious metals market
Activities in Iran’s Khorramshahr port climb
Iran’s Bahar Azadi gold coin price continues to increase
New facility to be put into operation in Iran’s electricity sector
Iran boosts production, export of greens and vegetables
Azerbaijan shares data on number of vaccinated citizens for May 10
Iran's ICOFC to develop two gas fields
National leader Heydar Aliyev`s 98th anniversary marked at parliament (PHOTO)
Program of Russian FM's visit to Azerbaijan unveiled
Azerbaijan confirms 371 more COVID-19 cases, 892 recoveries
Public reps of Azerbaijan paying tribute to late National Leader Heydar Aliyev (PHOTO)
Mine-clearing operations begin in Azerbaijan's liberated villages
Iran talks IAEA monitoring cameras at nuclear sites
Presidents of Russia, Azerbaijan hold phone conversation
Int'l organizations notified about Armenia's crimes against Azerbaijani civilians - Azerbaijan's prosecutor general
Criminal cases against Armenian terrorists who fought in Karabakh nearing completion - Prosecutor General of Azerbaijan
Uzbekistan eyes ratifying two more conventions of International Labor Organization
Uzbek mining and metallurgical complex exceeds export plan by half
Cargo movements in Iran’s Imam Khomeini port up
Iran reveals details of saffron exports
Various results achieved in Vienna every day – Iran’s MFA
Oil gains after cyberattack forces shutdown of U.S. fuel pipelines
Heydar Aliyev saved independent Azerbaijan from disappearing from political map - Russian expert
Iran, Saudi Arabia conduct both bilateral, regional talks – Iran's MFA
Registration of presidential candidates starts in Iran
Volume of loaded, unloaded cargo in Iranian ports grows
President Ilham Aliyev ends visit to Nakhchivan Autonomous Republic (PHOTO)
Uzbekistan notes significant increase in bank cash turnover in 4M2021
Uzbekneftegaz reveals indicators of oil and gas production and processing in 4M2021
Uzbekistan and France sign cooperation program
Uzbekistan Helicopters LLC opens tender for refueling vehicle
Political will of Heydar Aliyev bearing fruit - colonel general
Carbon price to rise, as governments pursue deeper decarbonisation strategies
Iran expects to increase vaccination
President Ilham Aliyev interviewed by Azerbaijan Television (PHOTO)
Death toll from COVID-19 exceeds 75,000 people
Number of confirmed coronavirus cases in Russia rises by 8,465 per day
President Ilham Aliyev views Ordubad railway station (PHOTO)
President Aliyev attends launch of project for reconstruction of drinking water supply, sewerage systems in Ordubad (PHOTO)
All news