Sunday, March 16, 2014

Article from a Reader - China lets the Yuan float

A blog reader sent a link to this article about China allowing the Yuan to float more freely. Below are the added comments from our reader (in bold type) along with some quotes they provided from the article. We welcome all readers to send us articles and comments at any time that are related to our topic here. We are happy to post them.

But here are some interesting quotes from the article:
"To dismiss worries over risks of large-scale money outflow, Lu noted that China has a massive four-trillion-dollar foreign exchange reserve and a 20-percent reserve requirement ratio (RRR). If there is a money crunch in the interbank market, the central bank has a lot of room to inject liquidity, including cutting the RRR, according to Lu."

"Whether the yuan rises or falls, analysts believe further band widening is highly possible as China has put financial reform on its priority agenda."

"In addition to discussions about how a more flexible yuan will influence the Chinese economy, Lu advised China to reconsider ways to set the daily central parity rate."

"As an intermediate step toward a market-based regime, China could peg the yuan to a basket of currencies weighed by the importance of its trading partners, he said."

"Reform toward a real managed float requires a group of more confident and pragmatic political leaders who are truly believers in markets, Lu said."

"The current Chinese leaders are market-oriented," he said.

It certainly sounds like there is some global reform about to happen most likely involving a new global reserve currency, and China is part of it.

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