BEIJING, April 9 (Reuters) - Chinese President Hu Jintao will probably talk about the yuan with U.S. President Barack Obama when he visits Washington for nuclear talks on April 12-13.
Their meeting might further defuse political tension between the two countries over the currency, which Beijing effectively repegged to the dollar in mid-2008 to help Chinese exporters weather the global financial crisis.
Many analysts believe China will allow the yuan to start strengthening as early as the second quarter and allow it to climb 3-4 percent over 12 months.
For what Beijing might do in months ahead, [ID:nSGE638076].
Here is a timeline of how China’s currency has developed.
Dec. 1, 1948: First ‘renminbi’(RMB) or “people’s currency” is issued as the People’s Bank of China (PBOC) is founded.
1955-1971: Exchange rate set at 2.46 yuan to the dollar until 1971, the year China takes a seat at the United Nations.
1972-79: RMB gradually climbs to 1.50 yuan to the dollar.
1979: As part of post-Mao reform and opening up, China begins foreign exchange retention quota system to encourage exports, allowing firms to retain a percentage of foreign exchange claims.
Jan. 1981: First round of yuan devaluation. State Council introduces “internal settlement rate” of 2.80 yuan/dollar.
Sept. 1983: State Council decides the PBOC should function solely as central bank, not a commercial bank as well.
Jan. 1, 1985: Internal settlement rate abolished. China sets rate at 2.80 yuan/dollar, ending dual exchange rate system.
April 1994: First foreign exchange trading centre opens in Shanghai, starting China’s inter-bank foreign exchange market
-- Yuan rate is set around 8.28 yuan per dollar as part of a tightly managed floating exchange rate policy.
Dec. 1, 1996: China allows yuan convertibility on the current account. It maintains controls on the capital account, fearing a crisis may spark a stampede out of the yuan.
1997-2005: Government keeps yuan pegged at 8.3 per dollar, resisting the temptation -- and some advice -- to devalue in line with its neighbours during 1997-98 Asian Financial Crisis.
2003: U.S. Senator Charles Schumer introduces first Congressional bill targeting value of yuan.
July 21, 2005: PBOC ends the dollar peg; revalues yuan by 2.1 percent to 8.11 per dollar.
It says it will pursue a managed floating exchange rate based on market supply and demand with reference to a basket of currencies. The yuan will be allowed to rise or fall 0.3 percent a day against the dollar from a reference rate set every morning by the PBOC.
2006: Two U.S. senators co-sponsor bill to impose high tariffs on Chinese goods if Beijing does not let the yuan rise; reflecting Congress frustration over the U.S.’ billowing trade deficit with China, which hit a record $233 billion in 2006.
2007: The yuan’s daily trading band against the dollar is widened to plus or minus 0.5 percent.
2008: As the global financial crisis rages, China effectively freezes the yuan in July at near 6.83 per dollar to help its exporters, after a 19 percent rise since the 2005 revaluation.
-- China’s central bank signs currency swap deals with South Korea, Malaysia, Indonesia, Hong Kong, Belarus and Argentina.
-- In March, central bank governor Zhou Xiaochuan proposes that the IMF’s Special Drawing Right, with the yuan as a component, could eventually displace the dollar as the world’s main reserve currency
-- In July, China launches a pilot programme allowing selected regions and countries to pay for imports and exports in yuan, a move towards internationalising the Chinese currency.
2010: Pressure on China to abandon its exchange rate peg mounts, especially from the United States.
-- On March 8, central bank chief Zhou Xiaochuan says Beijing will let the yuan resume its rise at some point as it unwinds its super-loose anti-crisis stimulus policies. But he says Beijing must be very prudent in doing so [ID:nSGE62700U]
-- On March 14, Premier Wen Jiabao says calls for China to let the yuan rise are unhelpful and vows that Beijing will steer its own course on currency reform.
-- On April 1, China announces Hu will visit Washington.
-- On April 4, U.S. Treasury Secretary Timothy Geithner says he is delaying a semi-annual report due on April 15 on whether China is manipulating its currency.
-- On April 8, dollar/yuan three-month non-deliverable forwards fall to the lowest level since July 2008, implying yuan appreciation of more than 1 percent, after the New York Times says China was is close to announcing a currency policy shift.