Beijing says more flexible yuan currency policies coming

100-yuan-noteNations, in particular, the United States, have long expressed concern over Beijing’s policy to peg its currency, the yuan, to the American dollar.

Beijing’s policy serves as a mechanism to keeping the value of the yaun discounted in order to give the country a competitive advantage in the global markets when it comes to exports by making their domestic products more attractive to international buyers due to a price advantage.

The result has been firm’s ceasing production in more expensive markets like North America in favor of moving manufacturing to China due to the lower prices.

This has resulted in hundreds of thousands of jobs being lost in the United States alone, prompting congressmen and other political officials to expressly voice their anger with Beijing’s policy.

President Obama has also made it clear that he opposes Beijing manipulating the yuan by artificially pegging the it, instead of allowing the forces of the free market to value the currency by adopting a floating policy.

It is believed the yuan is currently undervalued by as much as 40-percent.

President Obama has not yet officially classified China as a currency manipulator, but the topic is likely to be significant during the G20 meet that is scheduled later this month in Toronto, Canada.

On June 19, Beijing said it would make changes to its fiscal policy that will likely see the yuan appreciate in value through new and more flexible policies, but warned it would not allow its currency to materially increase in value.

Beijing has kept the yuan exchange rate very stable over the past couple of years, lastly pegging it to about 6.8 per USD just less than two years ago from the last fiscal update.

Many see the latest announcement as a disparaging move to calm congressmen, among other American government officials, in order to avoid having the issue become a primary topic during upcoming elections later this year, and even at the G20 meet only days away.


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Ramy holds a Bachelor in Health Studies with honors in Health Management from York University in Toronto, Canada. He just returned to Toronto following a career opportunity teaching English in South Korea. Write to ramy@business2press.com
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