Yuan to appreciate 2 to 3 percent in 2012: CASS

Boston (CNS) -- China's currency is likely to appreciate by two to three percent in 2012, predicted associate researcher Dr. Zhang Mingbo at the Institute of World Economics & Politics under the Chinese Academy of Social Sciences, Saturday.

During Zhang's address to the 15th Harvard China Forum he referred to the fact that China's trade surplus has been shrinking in recent years, and in the year 2012 is expected to drop to around US$ 100 billion.

The prospective decline is traced to two sources: the euro crisis and the economic downturn in the U.S. are limiting the growth of overseas market demands, and the real effective exchange rate of the yuan will keep climbing in the future.

At present, China has double surpluses in its current account, as well as capital and financial account, and both imbalances are likely to contract in the future, Zhang pointed out.

As the double surpluses narrow, the increasing rate of China's foreign reserves will slow simultaneously, and thus ease the tension of yuan appreciation.

Commenting on the lift of the daily limit of the yuan's trading against the U.S. dollar in the foreign exchange spot market from 0.5 percent to 1 percent effective April 16, Zhang holds the view that yuan is likely to appreciate at a slower pace with greater two-way volatility.

Regarding whether China should speed up opening its capital accounts, Zhang insists that now is not the right time, and China must push that agenda cautiously and gradually.