In an effort to let the market set the value of the yuan rather than policy, China’s central bank may be turning away from monetary intervention. Governor of the People’s Bank of China, Zhou Xiaochuan, says:
“We will allow and encourage the market’s demand and supply to play a bigger role. The degree of the central bank’s participation and intervention in the market will decrease in an orderly manner.”
China’s currency reserves – the world’s largest – are partially tied up in the struggling eurozone. However, in an effort to manage its cash holdings more effectively, the central bank may be pulling back from its eurozone investments. Despite that, though, critics say the relaxation of monetary policy and the new investment strategy isn’t enough, and that control over the currency remains biased toward the country’s exporters.