BEIJING Jan 27 The Chinese currency is trading
at a level "relatively close" to equilibrium with the U.S.
dollar, a senior central bank official told Xinhua, citing
slowing growth in China's massive foreign reserves as evidence
the yuan is coming into balance.
The yuan has lost importance as a source of political and
diplomatic friction in the past year, although U.S. presidential
candidate Mitt Romney did threaten to impose tariffs if he were
elected to offset what he said was a persistent undervaluation.
China's foreign reserves grew at their slowest pace in five
years in 2012 - a sign the value is close to equilibrium, Yi
Gang, central bank vice governor, told the state news agency on
the sidelines of the Davos forum in Switzerland.
"This means that the central bank doesn't have to intervene
in the market on a large scale, and the slower pace of growth in
our foreign exchange reserve is a good thing," he said.
Yi also said the Chinese government's promotion of the
internationalisation of the yuan was proceeding, although many
observers have said they doubt it can be used as a major reserve
currency given China's current account restrictions.
"What we are doing now is nothing but remove discrimination
against the renminbi and let it act just as other reserve
currencies," Yi told Xinhua, adding that the pace of adoption
would depend on the market.
"I would be actually pleased to see people have more
confidence in the renminbi and choose it over other currencies
thanks to a more sophisticated market, better implementation of
China's monetary policy, China's macroeconomic stability and
social stability, and stronger rule of law," he added.
Analysts have pointed to two-way movements in daily yuan
trading as a sign the yuan is close to fair value.
For many years after China depegged the yuan from the dollar
in 2005 and instituted a trading band, the currency steadily
appreciated. It was temporarily and unofficially repegged
beginning in the summer of 2008 to help stave off the looming
global financial crisis.