The value of the Chinese yuan will keep rising if China’s economic transformation is smooth, a newly-appointed adviser to the Chinese central bank said on Monday.
Chen Yulu, the head of China’s Renmin University who joined the central bank’s advisory monetary policy committee last week, told reporters on the sideline of a conference that the yuan must rise in accordance with Chinese business competitiveness.
“If industrial competitiveness remains weak, a one-way appreciation (of the yuan) would erode profits of many companies,” Chen said.
He said the yuan will keep the trend of appreciation if economic restructuring is successful.
Chen added the Chinese yuan, also known as the renminbi, could become fully convertible in the period 2016-2020.
Chinese Premier Wen Jiabao has said the yuan is close to its fair value, and People’s Bank of China Governor Zhou Xiaochuan has said the yuan exchange rate will be more flexible, prompting market expectations of an adjustment to the currency’s current trading restrictions.
The yuan has appreciated by about 30 percent against the dollar since a landmark reform in 2005 when its peg to the greenback was broken.
Analysts in a Reuters poll last week said they expected further appreciation of about 2.8 percent this year to around 6.15 per dollar from current levels.
The yuan’s movement is currently restricted to a 0.5 percent range either side of a mid-point fixed by the PBOC each day.
Chen is one of the three academic members of the 15-member monetary policy committee of the central bank. The committee does not have real influence on key decisions on interest rates and the yuan, but the members’ views are heeded in policy discussions.