Chinese officials appear inclined to move towards looser controls on the Chinese yuan but the time is not yet right, according to officials at the People’s Bank of China over the weekend.
Speaking at the National People’s Congress, central bank Governor Zhou Xiaochuan, said China must be very careful in how its abandons its crisis-fighting policies, including its management of the exchange rate between the yuan and the U.S. dollar.
The global economic recovery is not yet solid, he added.
Adding to the comments, PBOC deputy Su Ning, said that a gradual appreciation of the yuan will be beneficial to China, in that it would spur domestic demand, and improve standards of living for the nation.
The both policymakers’ comments suggest that China is indeed planning to loosen controls on the currency down the road, although the timing appears academic at best.
Indeed, while a stronger domestic economy would likely help China, it likely remains too soon for the nation to risk jeopardizing its thriving export economy with a stronger currency.
Meanwhile on the monetary policy front, the People’s Bank of China will said it would maintain a “moderately loose” monetary policy and sufficient liquidity to its financial system, reiterating comments made over the last several weeks over which the PBOC has tightened policy slightly.
Likely an appreciation in the yuan will have an upward effect on the U.S. dollar against which it is tied, but that time remains a ways off.
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