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Unified yuan forecast to bring market uncertainties

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THE unification of yuan exchange rates may result in a volatile yuan, exodus of funds and inflationary pressure in China, warns an economist with a large mainland-funded corporation in Hong Kong.

Lin Jiang, deputy general manager of the finance centre at China Merchants Holdings, said, however, the measure was necessary for the establishment of a modern foreign exchange system in line with international practices.

Speaking at a seminar yesterday, Mr Lin said during the process of establishing a national foreign exchange centre and unifying exchange rates, the yuan would be subject to devaluation pressure.

He said that under the old foreign exchange system there were many foreign exchange swap centres whose membership was restricted.

He also said that markets the centres had to serve were smaller.

''Therefore, the People's Bank of China could stabilise the yuan exchange rate more effectively by going into the market separately,'' Mr Lin said.

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