Analysts on China's Yuan

Analysts predict the Chinese yuan will not see any sharp rises in 2013 due to the country's dwindling trade surplus.

PKG:

The yuan's exchange rate experienced roller-coaster-style changes in 2012, as the first half of the year saw depreciation but reversed the trend to frequent gain by the daily limits after October.

In the spot market, the yuan is allowed to rise or fall by 1 percent from the central parity rate each trading day.

On the last trading day of 2011, the yuan's central parity rate against the U.S. dollar was 6.3.

It advanced to a high of 6.26 on May 2, 2012 but weakened to the lowest in the year of 6.34 on Aug. 16.

It closed at 6.28 on the last trading day of 2012.

Therefore, the yuan gained 0.25 percent last year. Considering the inter-session data, the annual appreciation was 1.15 percent.

At the end of 2011, slowing global and domestic economic recovery and the deepening European debt crisis beefed up expectations for a weaker yuan.

However, analysts say with improving trade data and developed countries introducing the easing policy, expectations for a stronger yuan re-emerged.

Some experts say there are no conditions for any sharp appreciation of the yuan. Since China started to reform its currency exchange rate regime in 2005, the yuan has risen more than 30 percent.

The current account trade surplus only accounted for less than 3 percent of the GDP at the end of 2011, much lower than a peak of 10 percent in 2007.

In the future, the proportion is expected to stay below 3 percent as overseas demand will remain recessive, which will further reduce pressure for the yuan to appreciate.

Analysts also indicated the stabilizing Chinese economy will reduce the possibility of yuan's depreciation.

However, lackluster external demands and exports will also restrain the space for the yuan's hefty appreciation.

To cope with the U.S. dollar's possible gains in the future, analysts say the Chinese government should accelerate the yuan's market reform and push for its two-way fluctuations to help business companies avert risks.

In a move to accelerate market reform, the country's central bank widened the yuan's daily trading limit against the U.S. dollar to 1 percent from 0.5 percent last April.