MercoPress. South Atlantic News Agency

China reveals composition of currencies basket

The United States dollar, the Euro, the Japanese Yen and the South Korean won are the main currencies of the new reference basket introduced by China following the July 21 revaluation of the Yuan.

China's currency had been pegged at 8,28 against the US dollar for over a decade and the adjustment announced allows it to float against a number of currencies which were revealed for the first time Wednesday by China's Central Bank.

Central Bank chairman Zhour Xiaochuan said the basket also contains the United Kingdom pound, Thailand's baht, Singapore's dollar, Malaysia's ringgit, Russian rouble, and Australian and Canadian dollars. However he didn't reveal the percentage composition of the different currencies in the basket.

"The currencies in the basket depend on the amount of foreign trade we conduct. The US, Euro-zone and South Korea are our biggest trading partners at the moment", said Mr. Zhou.

Last July 21 China decided to revalue the Yuan 2,1% to 8,11 to the US dollar and since the currency has appreciated slightly in the Chinese restricted foreign exchange market reaching 8,1062 Wednesday.

The Central Bank also announced other exchange reforms such as allowing non banking firms to trade in its offshore foreign exchange market plus a foreign exchange forwards on the domestic inter-bank market.

In related news the Bank of China, the country's number two, is considering selling minority stakes to foreign investors as a way of helping restructure and develop its business.

Chinese banks are courting foreign investors ahead of reforms which will open the industry to full competition in compliance with the terms of China's admission to the World Trade Organization beginning the end of 2006.

According to The Wall Street Journal, the Bank of China was in talks with four companies - British firm Royal Bank of Scotland, Swiss bank UBS, the Manila based Asian Development Bank and Singapore's Temasek Holdings - about potential deals.