China says speculation imperils yuan reforms

As the central bank highlighted the dangers of speculation on reform plans, China held a rare meeting with South Korea and Japan on the sidelines of an Asian summit in Laos where the leaders of the three countries agreed on the need for stable currency rates.

Market speculation has been rife China may soon loosen its grip on the yuan by widening its thin trading band near 8.28 per dollar or re-pegging it to a currency basket, or some combination of these options.

Forex markets buzzed last week with talk that the closed-door meeting of the Central Economic Work Conference could yield the first steps in currency reform, though most China analysts do not expect any action soon.

“On the renminbi (yuan) issue, there is some speculative force or behaviour at present which cannot be stopped completely,” the China News Service quoted Vice Central Bank Chief Li Ruogu as telling an economic forum.

“Such speculation, whether by people in China or overseas, will do no good at all to China’s reforms of the exchange rate and its economic development.”