MercoPress. South Atlantic News Agency

Yuan closely monitored by Chinese Central Bank

China is attempting to make the Yuan more flexible and so reflect demand and supply market forces, however a strong appreciation of the Chinese currency could be risky for the economy warned an outstanding Chinese economist.

Yu Yongding president of the World Economy and Policy Institute from the Chinese Social Sciences Academy said that the modest revaluation of the yuan decided last July could have an impact on some exports, but is will also help to diminish the strong foreign demand dependency of the Chinese economy.

"In the future, we'll let market forces play a larger role in fixing the exchange rate, but we can never discard intervening in the market", said Mr. Yu, who is the only academic in the Chinese Central Bank Monetary Policy Committee.

"I do not support a strong revaluation of the yuan since I believe this could be dangerous", he emphasized.

Mr. Yu's statements were made public following insistent speculation of a new revaluation of the yuan, which was flatly denied by the Central Bank.

China revalued the yuan 2,1% against the US dollar last July 21 ending a decade of a fixed exchange rate pegged to the US dollar. Under the new system China's currency is linked to a basket of world and regional currencies, mainly the country's main trade partners.

Mr. Yu who described the currencies basket system as "transitory", forecasted the Chinese economy would begin de-accelerating because of the weakness of domestic demand.