Yuan revaluation could be postponed: Report

Worried about a depleting trade surplus and a possible slowdown of its economy later this year, China is not likely to accelerate pace to revalue its currency, the yuan, experts revealed.

The Beijing-based China Daily reported Wednesday that the chances of an early revaluation of the renminbi look unlikely and could happen much later than expected, considering that the nation's trade surplus may see steep erosions due to the European debt crisis and the growing trade protectionist measures against China.

Both Chinese and foreign press have predicted that Beijing will allow the yuan to rise against the U.S. dollar sometime in the second quarter this year.

Some even estimated that a revaluation might materialize in May, after the annual high-level China-American Strategic and Economic Dialogue is held in Beijing from May 24-25. Analysts have put the gains of the yuan from 3 to 5 percent for the whole year.

Economists now consider such a move unlikely and expect any currency moves to be deferred till the end of the year with a smaller range and overall gains of 2 to 3 percent, the China Daily report said.

Ministry of Commerce officials had on Monday indicated that the prospects for the nation's exports were not that hopeful this year and the annual trade surplus may see a big drop.

"The improved trade balance will lay a good foundation for China to implement its macro-economic policy and the currency issue should not be too politicized," said ministry spokesman Yao Jian.

"The growth in imports will, however, far exceed that of exports due to the surging prices for imported goods, and hence the large decline in the trade surplus will not be such a big concern," said Dong Xian'an, a chief economist at Industrial Securities Shanghai.

Dong expects the trade surplus this year to drop by 30 percent to US$137 billion, compared with US$196 billion in 2009.

For example, in March China posted a trade deficit of US$7.24 billion, the first deficit in the past 70 months. From January to April, trade surplus plummeted by 79 percent.

"The monthly figures will hover near the balance point," said Yao.

"The sharp fall (in the trade surplus) is unavoidable. There are no signs of any improvement in exports as the European debt crisis is casting shadow on economic growth," said Yan Jinny, an economist with Standard Chartered Shanghai.

Yan feels that the market has lowered its expectations of a currency revaluation as the European debt crisis has hurt the region's economic growth and marred prospects for Chinese exporters. "The appreciation will not happen until there are clear signs that the European debt contagion has stopped spreading," Yan said.

According to Yan, even if the revaluation happens, the rise would be around two percentage points, the upper limit for the next 12 months.

By People's Daily Online