China widens yuan band but US not impressed
16 Apr 2012
China's widening of the yuan's trading band is not expected to blunt criticism of its currency policy by the US and the Treasury Department, which said yesterday that more progress was needed to correct a "misalignment" of the exchange rate.
"While we welcome the progress to date, the process of correcting the misalignment of China's exchange rate remains incomplete, and further progress is needed," the Treasury said.
The US has been pushing China over much of the past decade to allow the yuan to rise in value, arguing it was necessary to help rebalance the global economy as growth of China's huge trade surpluses slowed.
China's trade deficit with the US stood at an annual record of over $295 billion in 2011 and according to analysts this and Beijing's lack of respect for intellectual property would remain major sources of contention in the relationship between the two economic powerhouses.
Analysts also said it was not clear whether Beijing would fully implement the measure that would give banks and companies the most space to speculate on the yuan since China established its foreign exchange market in 1994.
Nicholas Lardy, a senior fellow at the Peterson Institute for International Economics said, the important thing to remember was the government was still intervening very heavily in the market. He added, it added roughly $100 billion to its foreign exchange reserves in the first quarter.
