People's Bank of China, the nation's central bank, said on January 21, 2007 that it will expand the flexibility of Chinese renminbi (RMB) yuan based on market forces, and also stressed its regulatory efforts to keep the Chinese currency's runaway float at bay.

After its annual meeting in Beijing on Sunday, the People's Bank of China announced that it will continue to depend on the market law of supply and demand to decide the yuan's value and optimize the management of exchange floating between the yuan and other currencies. The central bank pledged to make the Chinese currency more flexible but maintain its value at "a reasonable level," according to the statement released over the weekend.

In July 2005, China decoupled the decades-old peg between the yuan and the US dollar and began to let it float against a basket of global currencies including the euro and yen. Since the revaluation, the yuan has climbed nearly 6 percent after ebb-and-flow cycles. The corporate world has come to wonder whether the Chinese government has been containing the rate and value of its increasingly strong currency. The flexibility and appreciation of RMB have been thrust into the limelight of world economy.

The central bank said it will strive to build up its foreign-exchange management and ease the international trade imbalance this year. In managing yuan's rates in the global trade market, the balancing act between flexibility and stability is supposed to be an uphill mission for the central bank to accomplish. A report by China's Ministry of Commerce says the moderate appreciation of the renminbi will help the balanced development of foreign trade and the national economy in the long run.

Last Friday, after rising for four days in a row earlier in the week, the central parity rate of the RMB was 7.7788 yuan to one US dollar, down by 30 basis points from 7.7758 yuan on Thursday.