WTO considerations and the Olympics would provide the impetus for change
The central government will respond to growing pressure to revalue the yuan by making significant changes next year and possibly even floating the currency as early as 2008, economists say.
'There will be a widening of the trading band of the renminbi in 2004,' said Hu Biliang, a senior economist with the Chinese Academy of Social Sciences in Beijing.
'The Chinese government is a reasonable government and it always considers global concerns. China wants to be a respectable global player, so it will consider US and EU concerns. But it also needs to consider its reform needs and will balance it all before making a final decision.'
Mr Hu refused to speculate on how much the People's Bank of China would widen the trading band of the renminbi, which is pegged to 8.28 to the US dollar. But he acknowledged market sentiments that the central bank may allow the currency to trade within 0.3 percentage points higher in the coming year and perhaps even more in 2005.
But the leadership would not bow to international pressure to immediately widen the trading band.
'This is a political issue,' he said. 'It is a short-term issue - in the past we feared capital flight. Now we fear revaluation and hot money. ... The US has decided to politicise the renminbi because of next year's presidential elections - the US economy is so poor that President George W. Bush is pinning all the blame on the renminbi.
