China unlikely to let yuan appreciate in next 12 months
By Channel NewsAsia's Hong Kong Correspondent Leslie Tang | Posted: 26 November 2009 0101 hrs

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HONG KONG: China may allow its yuan to appreciate, but it won't be anytime within the next 12 months, according to banking giant Standard Chartered.

China has been under pressure from its trading partners to allow its currency to appreciate, but it is keeping to its position that it will proceed with currency reforms at its own pace, and in a controlled manner.

The pressure on China to allow its currency to appreciate has been growing.

China's key trading partners are arguing that the yuan is undervalued and creating imbalances with other major economies.

This was one issue raised by US President Barack Obama during his visit last week, but so far, Chinese leaders show no signs of budging.

And Standard Chartered said China is not likely to make any change in the next 12 months.

Sundeep Bhandari, regional head of North East Asia Global Markets at Standard Chartered, said: "We don't expect to see any significant move of the yuan, at all. In fact we'll probably see some movement again from 2011 onwards.

"And that will be about 2 to 3 percent. There's no real desire for the Chinese authorities to let the yuan revalue at this point in time."

The Chinese yuan has maintained at the same level against the US dollar over the past year. Some analysts say continued sluggish growth in exports and private investment give China little incentive to make a shift.

There are also concerns that any rapid appreciation of the currency could deal a blow to China's export-driven industries.

There has also been talk of the yuan possibly de-pegging from the US dollar, but StanChart said it does not see that happening for the next few years.

Sundeep Bhandari added: "Maybe in the longer term, maybe in three to five years as the renminbi looks to become fully convertible, which is one of the aspirations obviously that the Chinese authorities have.

"The 2020 vision of Shanghai being a financial centre. But I think in the immediate term, one to three years, I don't envision a scenario when this would happen."

StanChart remains confident about China's economic outlook, saying that its huge domestic market could be a major driver of growth. - CNA/de