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China relaxes yuan rate stance

James Thompson
Monday 21 June 2010 00:00 BST
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China has signalled that it may adopt a more flexible exchange rate for its currency, ending its two-year policy of pegging the yuan to the US dollar.

Economists interpreted the move as a concession to the US ahead of this week's G20 summit in Toronto, Canada.

In a surprise move at the weekend, a spokesman for the People's Bank of China ruled out "large scale appreciation" of the currency, which has been set at 6.8 to the dollar since 2008. But he added that the central bank would allow the market to play a more prominent role in setting the exchange rate at an "adaptive and equilibrium level".

The exchange rate policy has been a source of tension between the US and China, given America's substantial trade deficit.

President Barack Obama has come under pressure from US companies to take action against China.

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