The yuan closed steady against the dollar on Thursday and finished 2009 with its peg against the US currency intact as China resists international pressure to allow the yuan to appreciate to address trade imbalances.
China has recorded huge trade surpluses in recent years but may not yet be ready for yuan appreciation in the first quarter of next year as it awaits a recovery in exports, which sagged this year under the weight of the global financial crisis, to secure its own economic priorities including adequate jobs.
The government has made no secret of its intentions in this regard. The State Administration of Foreign Exchange (SAFE) said in a statement on Thursday that China would maintain basic stability in the yuan's exchange rate, while gradually proceeding with reforms whose methods, content and timing would be decided according to the country's own needs.
Dealers trading on the domestic market also often note that when China talks about exchange rate reform it means building up mechanisms to allow the yuan to move more widely, such as adding currency derivatives, and not yuan appreciation as is often presumed by Western critics.
"If a financial product were selected as the most stable in all the global markets this year, it would be none other than the yuan," said a senior dealer at a European bank trading on the Shanghai-based China Foreign Exchange Trade System, the domestic market. "China has never promised it would allow the yuan to appreciate in a certain timeframe, although Western critics have interpreted its repeated pledges for exchange rate reforms in this way."
Reflecting the Chinese policy stance, the People's Bank of China on Thursday set the yuan's daily mid-point against the dollar at 6.8282, barely changed from 6.8283 on Wednesday. The mid-point guided spot yuan to close at 6.8270 per dollar, little changed from Wednesday's close of 6.8253, with dealers reporting sluggish business ahead of the New Year's Day holiday on Friday, when the market will be closed.
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