China Continues to Promote Yuan as International Trading Currency
As China’s position in world markets continues to strengthen authorities are taking new steps to establish the yuan, or renminbi, as an international trading currency. The yuan advanced for the second consecutive day as the People’s Bank of China set the reference rate of the currency at the strongest level on record. The daily fixing set by the central bank was 0.07 percent higher at 6.2919 per dollar, being the strongest reading since July 2005.
President of Hong Kong-based Success Futures & Foreign Exchange, Stella Lee, was quoted as saying that the record fixing shows that the People’s Bank of China (PBOC) is still comfortable with yuan appreciation despite the fact that economic growth is slowing. According to statistics from the China Foreign Exchange Trade System, the yuan moved up by 0.08 percent to 6.2937 per dollar in Shanghai extending February’s gain to 0.24 percent. It touched 6.2884 on February 10, recorded as the strongest level since China merged the market and officials exchange rates in 1993. The yuan is permitted to trade at 0.5 percent up or down from the reference rate. In Hong Kong’s offshore market the yuan rose 0.02 percent to 6.2935, reflecting an advance of 0.1 percent for February.
Amid concerns that unfair trading practices by China are having a negative impact on US businesses, US President Barack Obama has created a new trade task force to investigate, and take action against, any US trading partners not trading by the rules. The executive order signed by President Obama noted that “Robust monitoring and enforcement of US rights under international trade agreements, and enforcement of domestic trade laws, are crucial to expanding exports.” The new International Trade Enforcement Center will ensure that US businesses have what the President referred to as “a level playing field”.
US-China relations have been strained in recent years, as the US economy has slowed and China’s economy has been experiencing vigorous growth, primarily powered by its manufacturing and export success. By keeping the value of the yuan low, Chinese goods are cheaper than local for many foreign buyers. The current debate regarding government subsidies in the solar panel industry underscores the challenges US manufacturers face when Chinese-made goods are cheaper than domestic. In a published interview, President Obama said that the United States was working to ensure compliance of all trading partners with international trade rules.