Under the plan, the yuan would move relative to the average values of a basket of currencies, including the dollar, yen, euro and possibly other currencies including the British pound. The Times report said the committee has given no time-line for the move and could delay acting until next year.
Whether China links a shift to a basket approach to the yuan's value at the same time as a potential revaluation of the currency remains to be seen. At every turn, the currency reform chorus seems to grow louder. After sealing a textile trade deal with the Chinese, EU trade chief Peter Mandelson urged China to consider pegging the yuan to a currency basket. At the June G8 finance ministers' meeting in London, Japan and the US again told China to hurry up and let go. Days before the meeting, Bank of Canada Governor David Dodge said a yuan revaluation isn't good enough, arguing for China to "quickly" float the yuan, or risk protectionism, which "could choke off the growth of international trade that has led to rising incomes around the world". In a Bloomberg interview, however, Canadian Finance Minister Ralph Goodale said pushing the Chinese too hard could backfire. "In dealing with the Chinese, it's not just a matter of making the hard-nosed economic argument, you've also got to make the more broader-based diplomatic argument, "Goodale said. "We don't want to trigger… some kind of counter-productive reaction."
The US, meanwhile, has issued the loudest calls for Chinese action, bowing partly to congressional pressures. In its strongest warning yet, the Bush Administration said in its twice-yearly report to Congress that China could be cited as a "Manipulative trade partner" and face economic sanctions unless it moves quickly to overhaul its currency system. At a recent Senate hearing, US Treasury Secretary John Snow predicted China would relax its currency by mid-October this year.