According to Chinese leaders, the time has come for a freely traded Chinese yuan. An announcement made today indicates that the Chinese are ready to let the yuan trade freely by 2020.
Earlier today, Chinese leaders released a short statement claiming that last week the ruling Communist Party had decided that it’s time for the yuan trade freely, without the strict valuation controls currently in place.
The statement is short, but the possibilities are tantalizing to many. For decades, the yuan has been tightly controlled. Although there has been some loosening in recent years in order to benefit the trade situation, Chinese leaders still manage the value of the yuan. This has caused tension, as many countries accuse China of keeping the yuan artificially low to make Chinese goods competitive.
However, with the recent reluctance by the IMF to reject the yuan as a reserve currency, and with the growing importance of trade, it appears that Chinese leaders are ready to make changes. There will need to be time to allow banks and others to adjust to a freely traded Chinese yuan, but it looks like we could see it by the end of the decade.
The exchange rate at 14:09 GMT is 1 USD = 6.3386 yuan.
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