The value of the China's Renminbi (RMB) against the US dollar hit a new high on Monday with the central parity rate at 7.8402 yuan to one dollar, breaking the 7.85 mark.

 

This signifies that the RMB value has risen by 5.31 percent since July 21, 2005 when the Chinese government launched the reform of the exchange rate system to allow the yuan to float against the US dollar within a daily 0.3 percent band from the official central parity rate.

 

The appreciation followed previous records on November 9 when the central parity rate hit 7.8697, breaking the 7.87 mark and November 23 when it was 7.8596, breaking the 7.86 mark.

 

The exchange rate was set at about 8.27 yuan per US dollar before the reform.

 

The yuan's appreciation is attributed to the continued slump of the dollar and expectations of an interest rate drop in the US, said analysts.

 

China's soaring foreign exchange reserves and the rocketing trade surplus are also considered important factors pushing the yuan's value to new highs.

 

China's foreign exchange reserves are expected to reach US$1 trillion after climbing to US$987.9 billion at the end of September with a monthly average increase of US$18.7 billion for the first nine months.

 

US critics have argued that China's currency is undervalued by as much as 40 percent, giving Chinese goods a price advantage and resulting in a mounting trade deficit for the US, which has exacerbated the pressure to appreciate the yuan.

 

However, Tang Xu, director general of the research department of China's central bank, said the current floating band of the yuan's exchange rate was wide enough.

 

(Xinhua News Agency November 27, 2006)