JPMorgan said China's recent historic interest rate adjustment would prelude a series of increases enabling Beijing to begin the process of gradually revaluing the yuan. JPMorgan Chief China China Economist Frank Gong predicted the yuan would appreciate by yearend, according to a report by the South China Morning Post. Gong said the revaluation would be implemented through a 2-3% widening of its trading band, coupled with the introduction of an onshore forward hedging market. He said conditions were "almost mature enough now" to move towards more currency flexibility. The economist warned that adjustments had to be gradual because any sudden shifts would inflate bad loans and deflate China's investment in US Treasuries.
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