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A week before the G20 Summit in Toronto, China announced it would allow a more flexible exchange rate for its currency.
It's the nation's first announcement to speed up the reform of the yuan in two years. But it also made no secret that it would not allow the yuan to appreciate too fast.
On June 19th, China's central bank announced it will proceed with reform of the yuan's exchange rate regime to enhance flexibility.
That ends the yuan's nearly two-year peg to the US dollar. But the central bank ruled out a one-off major appreciation.
Chinese Foreign Ministry spokesman Qin Gang reiterated later that the reform will be a gradual process.
Qin Gang, Chinese Foreign Ministry spokesman, said, "What I would like to emphasize is that, we push for the reform of RMB exchange rate mechanism and the flexibility of RMB exchange rate in an independent, controlled and gradual manner, and this position has been clear and remains unchanged."
Most economists also believe any appreciation in the yuan will be slow and modest. They say greater currency flexibility also suits China's own need for a more balanced economy.
Sir Howard Davies, Director of London School of Economics, said, "If you look at the overall shape of the Chinese economy, it excessively relies on exports. And domestic consumption is still weak with high bank savings. One response is to appreciate the yuan."
China's policy decision to peg it's yuan to the dollar was criticised as being undervalued, and giving Chinese exporters an unfair advantage.
The new move is still unlikely to convince critics of the depth of the reform. But China insists that its monetary policy should not be politicized. And the appreciation of the yuan alone cannot help solve the problem of huge trade deficits in other countries.