The debate over revaluing the Chinese currency is gathering momentum. In the US, this issue has become a politically sensitive issue. With the yuan becoming an important currency in Asia and even globally, the demand for making the yuan fully convertible is becoming an important issue in the global media. Whatsoever, the floating of Chinese yuan should be accompanied by deep reforms. All eyes are on the mainland to see whether it will float the yuan or not.

China is one of the few nations which still maintains a government-fixed rate and capital controls. Since the Asian financial crisis in 1997, Chinese currency has been pegged to the US dollar (the narrow band of 8.28). Then with the Chinese Central Bank intervention it appreciated around 5-8%. However, with the process of China's integration towards global economy, financial convergence calls for full convertibility of the currencyyuan or the Renminbin (RMB). China is under pressure from the international community to revalue the RMB amidst growing criticism that it is keeping Chinese exports unfairly cheap (A weaker currency means a country's goods are cheaper abroad, boosting exports) at the cost of the manufacturing jobs outside China. Exporters in the US say the Chinese currency is undervalued, making American goods far too expensive to compete in China and China-made goods are unfairly cheap for Americans. China is being accused of manipulating the exchange rate by buying and selling yuan on the international capital markets for a fixed price. Thereby it effectively discourages a free market value for the yuan.1

However, China is up against this criticism. The dragon is under increasing pressure to abandon its currency pegged to the dollar and float yuan. In the recent past, the global media was repeatedly pointing out that China's rapid accumulation of international reserves reflected a growing external imbalance. As the yuan becoming an important currency in Asia and even globally, the demand for making the yuan fully convertible is becoming an important issue in the global media.

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