Reuters reported that China will let the yuan rise about 5% against the dollar in 2011 as it needs a stronger currency to combat inflation and avert asset bubbles. But a commerce ministry official warned that any appreciation would do little to narrow China trade surplus with the United States, a constant irritant in the relationship between the world''s two largest economies.
The China Securities Journal said in a front-page editorial the yuan gains would be particularly strong in the first half of this year. It said "Yuan appreciation will make imports cheaper to reduce the impact of rising commodity prices in the international market providing relief from inflationary pressure."
According to pricing in offshore forwards markets investors expect the yuan to rise about 3% in a year time. But China based traders expect the yuan to appreciate about 2% in the first quarter of 2011 alone, partly propelled by President Mr Hu Jintao visit to the United States in mid-January.\
While the central government generally tries to paint a picture that it resists US pressure for yuan appreciation in reality it has often allowed it strengthen ahead of major political events in recognition of the importance of bilateral ties.