U.S. industry groups generally praised a move by China July 21 to end its currency peg and implement a "managed float" of the yuan, but they said additional steps are needed. The National Association of Manufacturers, among the first groups to raise the issue of an artificially low currency, said the move "is potentially of enormous significance" but that it depends on how the system is implemented. "While the initial 2.1% revaluation is inadequate, we view it as the beginning of what should be a significant revaluation," NAM President John Engler said. "China's new currency system offers the possibility for continued upward movement of the yuan in the coming weeks and months, and that is what we will be looking for."
The reaction came as China's central bank said it was fixing the yuan at 8.11 to the dollar compared with the old rate of 8.2765 yuan, effectively a two percent revaluation. The bank added that it was scrapping the yuan peg to the U.S. dollar and setting the Chinese unit against a trade-weighted basket of currencies but did not reveal what these currencies were.
Dave McCurdy, president of the Electronic Industries Alliance said, "We believe this pragmatic approach will allow the yuan's value to rise against the dollar in a way that will allow U.S. manufacturers to compete more fairly in the world market and will not destabilize China's domestic economy."
Copyright Agence France-Presse, 2005