The yuan appreciation in the face of growing Chinese trade surpluses is one of the topics expected to be discussed when U.S. President Barack Obama visits China next week.
The United States also wants China to encourage domestic spending that would further open its markets for U.S. exports.
There have been indications China might allow its currency to move up, which would ease the pressure on the greenback in world currency markets.
The People's Bank of China, the country's central bank, in its latest quarterly monetary policy report said for the first time it would improve the mechanisms of the exchange rate determination "based on international capital flows and movements in major currencies," China's state-run Xinhua news agency said.
The report quoted Tan Yaling at Peking University as saying the bank's wording only showed China would reduce speculation and strengthen risk control and did not suggest a change in the yuan's exchange rate policy.
"Sudden upward movement in the yuan would slow China's economic growth when the country's exports just showed signs of recovery," she said.
Chief economist Zuo Xiaolei at Galaxy Securities said the pace of the yuan's appreciation should be determined not just by the foreign trade surplus but also by China's internal development, including the massive stimulus package and the accumulated liabilities of local governments.
China's foreign exchange reserves, the largest in the world, exceeded $2.27 trillion at the end of the third quarter, up 19.26 percent from last year, the central bank said. Chinese exports showed a big jump in October, producing a monthly surplus of $24 billion.
Copyright 2009 by United Press International.
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