China’s central bank said on Sunday it would maintain a stable exchange rate and didn’t anticipate major changes in the value of the yuan, a day after saying it would manage the currency more flexibly.
In a commentary on Saturday’s announcement, the People’s Bank of China attempted to assuage fears of a major strengthening of the yuan, also known as the renminbi, or “people’s money.” “There is at present no basis for major flucuation or change in the renminbi exchange rate,” the bank said on its website. Keeping the rate at a “reasonable, balanced level” would contribute to economic stability and help restructure the Chinese economy with greater emphasis on services and consumption.
The yuan’s value has been pegged to the US dollar for two years, a major source of friction with countries who say the yuan is undervalued to China’s own benefit.
The bank’s statement said it would rely more on a basket of currencies that includes the US dollar to determine the exchange rate.
Chinese officials have long said reforms to the currency would be gradual. While no specific policy changes were mentioned, financial markets will be watched closely on Monday for any effects.
President Barack Obama said China’s move would help protect the economic recovery, while the European Commission said it would benefit “both the Chinese economy and the global economy.”
The announcement, timed just before President Hu Jintao’s trip to the G-20 summit in Canada.