BRUSSELS -- China's reform of the renminbi (RMB), also known as the yuan, has been successful, and the yuan's exchange rate is approaching an equilibrium level, an adviser to China's central bank said Friday.
"During the last few months of 2011, many Chinese private investors started to spend the Chinese currency buying U.S. dollars, which is an indication that the currency is near an equilibrium level," Li Daokui, a member of the monetary policy committee of the People's Bank of China (PBOC), told Xinhua.
Thanks to a stronger yuan, China's trade surplus has shrunk from about 8 percent of the country's gross domestic product (GDP) before the financial crisis in 2008 to 2.3 percent registered in 2011, according to the PBOC.
Li, speaking on the sidelines of the Annual Meeting of World Economic Forum in Davos, expected the trade surplus to further decline in 2012, to 1 percent, mainly thanks to the stronger Chinese currency, which means the reform of the yuan's exchange rate mechanism has been successful.
Since the Chinese government embarked on the reform of its currency's exchange rate mechanism in June 2010, the RMB has appreciated by more than 7.5 percent against the U.S. dollar, according to the PBOC.
Taking into account the higher rate of domestic inflation in China than in the United States, the yuan has appreciated even more against the U.S. dollar, according to a report submitted by the U.S. Department of Treasury to the Congress on international economic and exchange rate policies in December.
The RMB has risen against the U.S. dollar on a real, inflation-adjusted basis by nearly 12 percent since June 2010 and nearly 40 percent since China first initiated currency reform in 2005, said the report.
"However, people in the international community even don't know the latest figures and their minds are filled with the old figures about China's trade surplus," the central bank adviser said.
