China's central bank has pledged to work towards a more flexible exchange rate regime, but comments by government officials and researchers suggest greater liberalisation could still take some time.
The People's Bank of China, in a reiteration of long-standing policy, said in its 2005 annual repo to push currency reforms while keeping the yuan on an even keel.
"We will strengthen the flexibility of the yuan's exchange rate, while keeping it basically stable at a reasonable and balanced level," the report said. The official China Securities Journal printed excerpts from the document over the weekend.
China revalued the yuan by 2.1 percent last July and cut it loose from a dollar peg to float within managed bands.
After rising at a glacial pace for the rest of 2005, the rate of climb quickened in February. Its ascent has since stalled, even though it briefly strengthened past 8 to the dollar on May 15, despite intense US pressure for a much stronger yuan.
It stood at 8.0225 per dollar on Monday.
In a sign policy makers are divided about how to proceed, two government researchers gave conflicting views on how Beijing should move forward in reforming its foreign exchange regime.
Zhang Bin, a researcher with the Chinese Academy of Social Sciences, said China should let the yuan rise further in several leaps, rather than through steady appreciation.
"For one, this would help fend off market expectations of yuan appreciation. These expectations pose a great threat to the stability of the economy," Zhang told the International Finance News.
"Slow, steady appreciation can only drag out that problem for a longer time," Zhang said.
But Liu Yuhui, head of the academy's China Economic Evaluation Centre, wrote in the Shanghai Securities News that the costs of a rapid rise in the yuan would be "unbearable".
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