China Watch Blog has learnt that the International Monetary Fund welcomed a decision by China’s central bank on April 14 to widen the yuan’s trading band against the dollar in a major step towards loosening currency controls.
The yuan is currently allowed to trade 0.5 percent on either side of a midpoint price set by the central bank every trading day.
The new rules — seen as a shift towards adopting more market-oriented reforms — will come into effect today and allow the currency to fluctuate by up to 1.0 percent either side, the bank said in a statement.
IMF chief Christine Lagarde described the move as an “important step.”
“This underlines China’s commitment to rebalance its economy toward domestic consumption and allow market forces to play a greater role in determining the level of the exchange rate,” Lagarde said in a statement.
Saturday’s announcement means that the yuan will be allowed to fluctuate further against the dollar.
The bank said the change was decided “in order to meet market demands… (and) enhance the flexibility of RMB (the renminbi, as the yuan is officially known) exchange rate in both directions.”
“In view of the domestic and international economic and financial conditions, the People’s Bank of China will continue to fulfil its mandates in relation to the RMB exchange rate, keeping RMB exchange rate basically stable.”
The announcement came after China said Friday its economy grew at its slowest pace in nearly three years in the first three months of 2012, expanding by 8.1 percent
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