Increase in yuan flexibility likely

CHINA may increase the flexibility of the yuan should the country’s trade surplus continue to expand this year, central bank governor Zhou Xiaochuan said.

“The data from 2006 show that China’s trade surplus has been increasing, and if this situation continues, then I think the flexibility of the exchange rate will be increased”, People’s Bank of China’s Mr Zhou said in Basel, Switzerland, during the bi-monthly meeting of central bank governors from the Group of 10 nations.

China is under pressure from the US and other Group of Seven nations to make its currency more flexible and cut its trade surplus, which pushed its foreign-exchange reserves to top $1 trillion, flooding its market with excessive liquidity.