Chinese Premier Provides Few Details on Timing of Planned Exchange Rate Policy Reforms

December 8, 2004

Chinese Premier Wen Jiabao discussed the exchange rate value of the yuan December 8 during meetings with German Chancellor Gerhard Schroeder. Wen’s December 8 comments clarified that interim changes will first create "a managed floating exchange rate" that "can be controlled and is variable" before moving to the eventual free float that Chinese policymakers have long cited as the final goal of China’s exchange rate policy. This announcement will likely lead to further speculation in China’s currency, which is currently valued at 8.28 yuan to the U.S. dollar. Premier Wen’s words, however, leave unspecified the time frame during which his government plans to complete the gradual changes discussed with Mr. Schroeder, or a target date for the eventual free float of the yuan.