China Prepares to Revalue Its Currency

According to a report from the New York Times Thursday citing sources close to the situation, the Chinese government is getting set to announce a revision of its currency policy soon that will allow for greater variation and a jump in the currency's value against the dollar.

The central bank in China has apparently won its argument with the nation's government to create more flexibility in the Chinese currency, but the sources cited in the report said that the announcement could be delayed if a last-minute problem arises.

The shift will allow the currency to jump 2 percent overnight against the dollar and then open it up for trading at a wider daily range. This would cause a trend of strengthening against the dollar.

China will likely show that the currency could rise or fall against the dollar on any given day to discourage any flood of investment into China, according the people familiar with the situation.

The move comes as U.S. Treasury Secretary Timothy Geithner is holding meeting in China on Thursday with senior officials in Hong Kong and is set to meet with Vice Premier Wang Qishan in Beijing in Thursday night.

The commerce ministry in China has publicly opposed the rise in value of the country's currency, but interest groups in Beijing have repeatedly argued that China is to dependent on the dollar and that a more flexible currency would make managing the Chinese economy easier.

"Whether to let the yuan slowly appreciate or let it rise to a tolerable range after careful calculation, I think it is better to have that quick, prompt appreciation," Chinese central bank official Xia Bin told Reuters. "At a certain point, when necessary, it is better to have a quick, prompt appreciation in a bid to fend off speculative capital."

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