China's central bank on Tuesday denied the possibility of a further appreciation of the yuan after it allowed the currency to rise 2 percent in value against the US dollar on July 21.

 

The 2 percent appreciation was an adjustment on the yuan's exchange rate determination mechanism, a spokesman for the People's Bank of China (PBC) said.

 

"It does not mean that there will be further revaluation (of the yuan) afterwards," the spokesman said in a "solemn statement."

 

The increase basically caters to the need to materialize the overall balance in commodity and service trade as it was set in line with the extent of surpluses and structural adjustment in China's foreign trade, as well as the bearing capacity of domestic firms, he said.

 

Last week, China raised the value of yuan to a level of 8.11 per US dollar and scrapped the currency's peg to the dollar, "referring to" an unrevealed market basket of currencies instead to set the yuan's trading prices.

 

The PBC spokesman said some media reports disclosed a misunderstanding of China's exchange rate reforms.

 

According to the spokesman, these reports "wrongly" reported that the 2 percent appreciation of the yuan was an initial adjustment implying future adjustments. This "will trigger the expectation of further rate hikes," he said.

 

(Xinhua News Agency July 27, 2005)