China-US Talks on RMB Appreciation:
Yuan to Rise in 3rd Quarter

BEIJING, China – China President Hu Jintao (photo) addressed the much debated issue of the Yuan Renminbi exchange rate at the yesterday closed two-day China-US ‘Strategic and Economic Dialogue’. At this meeting high-level officials began wide-ranging talks on financial market reforms, trade and reviving global growth. According to business publications in China President Hu’s words indicate that China will allow the yuan to rise during the third quarter of this year.

President Hu Jintao said on the yuan exchange rate: “China will continue to steadily advance the reform of the formation of the yuan renminbi exchange rate mechanism under the principle of independent decision-making, controllability and gradual progress.” According to Dong Xian'an, chief economist at Industrial Securities: "Hu's words send a message that China is considering the issue seriously. There is a high possibility that China will allow the yuan to rise during the third quarter.”

China has kept the yuan pegged at a rate of about 6.83 to the dollar since mid-2008, after the currency gained 21% from 2005 to 2008. On April 29, 2010 Bike Europe reported: “In Beijing, Shanghai and Hong Kong business banks economists expect that the Yuan appreciation will be limited. They expect the exchange rate to be raised by 5 to 6%. A raise by 20 to 40% as strongly suggested by the US government is totally unacceptable for the Chinese government, say these sources.”

More recent publications on the issue indicate a possible raise of about 15% of the yuan exchange rate. In addition to a more expensive yuan the current labour crisis in China, which results in higher wages, is expected to lead to a price explosion for made in China (e)Bikes, parts and accessories.

Source: Photo Sina