Amid looming threat of economic sanctions by the United States, China's central bank has pledged to increase the floating flexibility of yuan while keeping it basically stable at a reasonable equilibrium.
The People's Bank of China reiterated in a report after its quarterly monetary policy meeting that China will continue to improve its exchange rate mechanism.
China should continue to implement a prudent monetary policy, it said.
The yuan strengthened to 8.0250 against the US dollar on Monday, the highest level since its July 21 revaluation, but weakened marginally to 8.0296 on Friday. The Chinese currency has gained more than three per cent since July last year.
US senators Charles Schumer and Lindsey Graham are in China to discuss growing concerns in the US Congress about China's trade practices, currency policy and intellectual property rights.
The visit comes as a March 31st deadline nears for the Senate to vote on a bill written by Schumer and Graham that would impose a 27.5 per cent tariff on Chinese goods. The bill is designed to counter what the Senators call China's artificial currency exchange rates that benefit Chinese manufacturers at the expense of American producers.
Many US lawmakers and labour unions believe the yuan is undervalued, giving China's exports an unfair advantage that has cost millions of American jobs and led to a record bilateral trade deficit that hit $202 billion last year.
China would revalue its currency, Chinese Premier Wen Jiabao said a week ago adding that the "RMB now boasts the room and capacity to float up or down on its own in line with the current mechanism and market changes."
Meanwhile, Chinese Vice Premier Wu Yi met the two US senators, Graham, a Republican and Schumer, a Democrat and exchanged views on China-US relations and economic and trade cooperation between the two countries.
Wu said the bilateral economic and trade cooperation has brought about substantial benefits for people of the two countries and it is in the common interests to keep and further develop such relations.
Wu expressed her hope that the US will cooperate closely with China and rely on consultations to resolve the existing problems in the process of development.
She also urged the US to avoid trade protectionism and prevent the trade issues from being politicised.
Two US senators, who briefed journalists on their trip and talks with the Chinese side, including with the Governor of the PBOC and Chinese Commerce Minister, Bo Xilai, claimed that they have become more optimistic about China's currency reform.
"We are more optimistic than we were when we came here," Schumer said. "We have seen that the Chinese government and the Chinese people actually have a convergence with the American people on currency".
We believe there is real possibility that the Chinese government and Chinese people see it in their interest to let the yuan float," said Schumer, "so we're feeling better."
The two senators said they believe China's currency issue will be solved over a reasonable period of time but when asked about whether the US Congress would vote their bill, Schumer said that "the jury is still out" and "we still need some concrete signs of movements".Do you want to discuss stock tips? Do you know a hot one? Join the Stock Market Investments Discussion Group
