Yuan to rise 5-6 percent in 2011: China central bank adviser

BEIJING Fri Jan 7, 2011 3:32am GMT

Chinese one yuan coins and 100 yuan banknotes are seen in this picture illustration taken in Beijing December 30, 2010. REUTERS/Petar Kujundzic

Chinese one yuan coins and 100 yuan banknotes are seen in this picture illustration taken in Beijing December 30, 2010.

Credit: Reuters/Petar Kujundzic

BEIJING (Reuters) - The yuan is expected to rise between 5 and 6 percent this year against the U.S. dollar, Li Daokui, an adviser to China's central bank, was quoted as saying in a local newspaper.

Li' comments follow remarks in an official Chinese paper this week that also called for a 5 percent gain in the yuan against its U.S. peer in 2011 to temper imported inflation and cool price pressures.

"My personal view is that the yuan will rise by 5 to 6 percent this year in a controlled and gradual manner," said Li, one of three academics on the central bank's monetary policy advisory committee.

Li's comments on the yuan do not represent China's official policy stance but they do shed light on how some senior officials in Beijing view the currency, which is a lightning rod between China-U.S. ties.

Li's comments were reported by the Xiaoxiang Morning News on Thursday. He had made the remarks in a speech on Wednesday at an event sponsored by the newspaper in Changsha, the capital city of China's central Hunan province.

Li said China will steer its monetary policy in a modest and gradual way, and that investors should not rule out the chance of more interest rate rises in 2011.

He added that China's economy will grow at least 9.5 percent this year, and that inflation will hit 4 percent. This means economic growth will largely be on par with last year's pace, while inflation picks up from 2010's 3.3 percent.

If the yuan indeed climbs 5 percent this year, it will far outstrip market expectations. The latest pricing in offshore forwards market showed investors only see the currency gaining 2.7 percent for all of 2011.

China's central bank, which controls the yuan's value against the dollar, has on its part given no indication of any shift in policy. It reiterated on Thursday that it would keep the yuan exchange rate "stable."

But with China's inflation hitting a 28-month of 5.1 percent in November, some analysts believe the country will be compelled to let the yuan rise faster to rein in inflation.

China has drawn ire in recent years from its trade partners, especially the United States, for not letting the currency rise faster. Some U.S. politicians say China deliberately suppresses the yuan's value to gain trade advantage, which China denies.

With China President Hu Jintao set to visit Washington from January 18, many believe the governments of the world's two biggest economies will try to address their ongoing spats over the yuan.

In anticipation of that, some traders have speculated that China may lay the ground for currency talks by letting the yuan rise as much as 2 percent in the first quarter alone.

(Reporting by Zhou Xin and Koh Gui Qing; Editing by Jacqueline Wong)

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