Speaking at China's ongoing annual sessions of top legislators on Saturday, the country's central bank chief gave the strongest hint yet from a top official that the value of the Chinese yuan may be raised. But whether or not this will happen is still a contentious issue within China. CRI's Dominic Swire has more.
The Chinese yuan was pegged to the dollar in July 2008 at around 6.83 yuan, a value that many critics including the Obama administration deem too low. Chinese officials have consistently rebutted calls to raise the value. However, during a speech at the ongoing meeting of top legislators in Beijing on Saturday, the Governor of the Central Bank of China Zhou Xiaochuan hinted at a change of policy. (www.hXen.com)
"If we need to move from the irregular policy into a regular economic policy,we must be very cautious about the selection of the timing. These policies also include renminbi exchange rate policy."
Pressure on China to raise the value of its currency has been mounting for some time. The US administration claims that the relatively low level of the yuan gives Chinese exporters an unfair advantage because they can undercut the price of US products.
Proponents of renminbi appreciation argue that the move would be good for the Chinese consumer, increasing their purchasing power as imports effectively become cheaper.
However many within China fear just the opposite - that reducing China's competitiveness in the export sector could cause job loses and even wipe out whole swathes of industry causing considerable instability.
Wang Xiaolu is Deputy Director of National Economic Research Institute of China Reform Foundation.
"If you make this change some workers in export factories may lose their jobs. This is no small thing. Maybe related to hundreds of thousands or millions of people. That's a big issue."
Wang Xiaolu expects that there will be some appreciation in the long run, but says this is likely to be slow and gradual to avoid the potentially destabilizing factor of speculators hitting the market.
"If you give people expectations then the hot money comes. This causes much instability. The money comes today and goes tomorrow. When it comes, you have a lot of foreign reserves. But when it goes you have big trouble. Some banks may go bankrupt or this kind of thing."
While those hoping for the yuan to appreciate now have some cause for optimism, they may also need to be very patient at the same time.
