Yuan is appreciating too fast against US dollar.
China to Slow Yuan Gains for Growth, Researcher Says (Update1)
By Belinda Cao and Judy Chen
July 29 (Bloomberg) -- China will slow the pace of the yuan's gains as the government seeks to bolster economic growth, said Li Daokui, a researcher at Tsinghua University who attended a meeting hosted by President Hu Jintao last week.
``Fast yuan gains attracted inflows of speculative funds, which not only fuel inflation but also may exit on a large scale some day, threatening economic stability,'' said Beijing-based Li, head of the China and World Economic Research Center at the university. ``That goes against the central government's goal of stable growth set in the recent Politburo meeting.''
The Politburo's concern that a global slowdown will undermine China's boom prompted the biggest policy change in five years, according to Donald Straszheim, vice chairman of Roth Capital Partners, a U.S. investment bank specializing in emerging markets. The central bank is likely to stop tightening monetary policy after six interest-rate increases since the start of 2007, Los Angeles-based Straszheim said.
China's Politburo, the Communist Party's top decision- making body, said in a meeting July 25 that maintaining ``steady'' growth and fighting inflation were the top priorities.
``Beijing is increasingly fearful that growth will slow to a level which will not create sufficient new jobs to fuel the rapid rise in living standards the country now enjoys,'' Straszheim, former chief economist of Merrill Lynch & Co. said in a note to clients. ``This is striking because inflation is still too high.''
The yuan gained 0.21 percent to 6.8264 per dollar in Shanghai as of 1:05 p.m. today, after yesterday posting the biggest drop since a dollar peg ended in 2005, according to the China Foreign Exchange Trade System.