Description

China has moved from a fixed exchange rate regime to a floating rate by pegging its currency to a basket of currencies in 2005. Since then, the value of yuan has become a central issue affecting global trade environment, because the yuan is considered to be undervalued by China's major trading partners. Due to the global slowdown, China has given priority to the domestic enterprises by encouraging export growth, which has slowed down appreciation of RMB. China has also taken initiatives to internationalize the yuan by promoting it as an international settlement currency, but the process is expected to be slow and China is likely to make adjustments to its financial and monetary systems to make the RMB an international settlement currency.