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Chinese Currency will continue to rise in 2007

The exchange rate of Renminbi, the Chinese currency, is expected to appreciate by some five percent to one U.S. dollar for 7.44 yuan, according to Xinhua Economic Analysis Report released end of December 2006.

The report projected that the pace of RMB appreciation would be faster in the first half of 2007 than in the second half.

In 2006, the value of the RMB rose 3.28 percent against the dollar, with an accelerating trend from 0.66 percent in the first quarter to 1.15 percent in the fourth. The central parity price closed at one U.S. dollar for 7.8141 yuan, the lowest of the year.

Earlier in December, China's State Information Center predicted a three-four percent appreciation of the yuan in 2007, while the Bank of America and Deutsche Bank expected a rise of four-six percent and 4.5 percent, respectively.

China raised the value of yuan by two percent to 8.11 per U.S. dollar and started linking it to a basket of currencies on July 21 of 2005, and allowed it to move 0.3 percent above or below the parity rate against the U.S. dollar.

However, some economists argue that the appreciation of the RMB is a double-edged sword, as it will make Chinese exports more expensive and therefore reduce export volume.

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