Export woes may spur yuan rethink
Gains in the currency have made Chinese goods uncompetitive abroad at a time when Beijing counts on trade to ease the pain from reforms
Beijing may be about to begin a rethink of its currency policy in an effort to give the country's struggling exporters the flexibility they need to cope with a raft of painful economic reforms.
That is bad news for Beijing policymakers, who are just beginning to see signs of economic stability returning in recent data after growth dropped to a three-year low in the second quarter.
Economists like Bank of America Merrill Lynch's Lu Ting say a further rise against the dollar in the yuan - the level of which is based on a central parity rate set each day by the central bank - could undermine export competitiveness.
The problem for the government is that it needs trade to strengthen to take some of the strain off reforms that are required to rebalance the economy and reduce a growing dependency on the investment-led spending that now underpins growth.
A big part of the currency problem is that much of the yuan's appreciation this year has been tied to a rebound in the dollar from multi-year lows.
Zhang Monan, deputy chief of the economic forecasting department of the State Information Centre, a unit run by the National Development and Reform Commission, said that under the existing exchange rate system, the yuan had moved in tandem with the greenback while being unable to reflect changes in the values of the currencies of the mainland's other major trading partners.