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The People’s Bank of China, the nation’s central bank, said in a statement that the yuan would be permitted to move up or down 0.3 percent from the close the previous day.
“It’s definitely the beginning of a new policy,” said Ira Kalish, Deloitte Research’s global director of consumer business. “I wouldn’t be surprised to see a 20 or 25 percent revaluation over the next year or so.’’
Nicholas Lardy, a senior fellow at the Institute for International Economics, a Washington-based think tank, said, “The body language of the statement seems to suggest there might be additional moves to come.”
Cass Johnson, president of the National Council of Textile Organizations, said, “It’s not a big enough revaluation. Two percent is meaningless. It’s really not going to slow Chinese exports down at all. We don’t know if this is a step or if they’ve done some smoke-and-mirrors thing.”
The Bush administration reacted cautiously.
“I was struck by and greatly welcome their commitment to use market forces to bring the currency into alignment with underlying demand and supply, and that is good for China and good for the global economy,” Treasury Secretary John Snow said at a news conference. “We will want to follow this closely and we will want to monitor it as they move forward with this new mechanism.”
China’s currency move came as GOP leaders in the House prepare to consider a vote on legislation that would make it possible for U.S. companies to file trade cases against China. The measure is seen as an attempt to garner support for the administration’s Central American Free Trade Agreement.
Sen. Charles Schumer (D., N.Y.), who with Sen. Lindsey Graham (R. S.C.) introduced legislation for a 27.5 percent tariff on all Chinese imports, said, “If there are not larger steps in the future, we will not have accomplished very much. But after years of inaction, this step is welcome.”