The Chinese yuan, also known as the renminbi, is already convertible under the current account - the broadest measure of trade in goods and services. However, the capital account, which covers portfolio investment and borrowing, is still closely managed by Beijing because of worries about abrupt capital flows.
Yuan rises on positive China trade data
The yuan advanced to the strongest level in 20 years after the central bank raised the currency's daily fixing to a record and the mainland's trade surplus widened to the biggest in more than four years.
Exports rose 12.7 per cent from a year earlier in November, official data showed yesterday, compared with 5.6 per cent growth in October. The trade surplus expanded to US$33.8 billion, the largest since January 2009. The People's Bank of China raised the yuan's reference rate by 0.17 per cent to 6.1130 per US dollar, the strongest since a peg to the dollar ended in July 2005. Yesterday's increase was the biggest since June 7.
"Strong economic data are fuelling further optimism in the yuan," said Stella Lee, president of Success Wealth Management in Hong Kong. "Funds continue to flow into China to get exposure to yuan appreciation as well as economic growth."
The yuan was trading at 6.0718 per US dollar yesterday evening. It touched 6.0715 earlier, the strongest level since the government unified the official and market exchange rates at the end of 1993. The currency, which has advanced 2.6 per cent this year, can trade a maximum 1 per cent on either side of the central bank's daily fixing.
In Hong Kong's offshore market, the yuan rose 0.12 per cent to 6.0624 per US dollar.