By peeling back trading restrictions on the yuan, Beijing is working toward its goal of having a currency that trades relatively freely, or is basically convertible, by 2015.
Below is a timetable of key reforms to China’s foreign exchange system.
1988 – China sets up semi-official currency swap centres around the country to allow firms to trade the yuan, also known as the renminbi or “people’s currency”, at a rate that better reflects market demand.
1994, Jan – China unifies its dual exchange rates by aligning official and swap centre rates, officially devaluing the yuan by 33 percent overnight to 8.7 to the dollar as part of reforms to embrace a “socialist market economy”.
1994, Apr – China sets up its first interbank currency market in Shanghai, the China Foreign Exchange Trade System. The yuan’s value is fixed around 8.28 to the dollar and the central bank intervenes to keep it stable.
1996, Dec – China allows the yuan to be fully convertible under the current account.
1994-1996 – The yuan strengthens steadily from 8.7 to the dollar to around 8.28.
1997-1999 – China wins wide praise for keeping the yuan stable during the Asian financial crisis despite pressure to devalue. The yuan was boxed between 8.2770 and 8.2800 for about three years through frequent central bank intervention.
2000 – China allows the yuan to close slightly above its 30-basis-point band, which is later widened by 10 points to 8.2760-8.2800 against the dollar.
2001, Dec – China joins the World Trade Organization and pledges to gradually adjust its currency regime.
2003 – China’s huge trade surplus with the United States and the rest of the world leads to mounting international pressure on Beijing to let the yuan rise to balance global trade.
2004, Dec – Premier Wen Jiabao says China will move gradually towards a flexible currency regime.
2005, Jul – China revalues the yuan by 2.1 percent and revises rules governing its currency, saying it has shifted to “a managed floating exchange rate based on market supply and demand with reference to a basket of currencies“.
The central bank says the dollar, euro, yen and Korean won are the main currencies in the basket. Others include the Singapore dollar, sterling, Malaysian ringgit, Russian rouble, Australian dollar, Thai baht and Canadian dollar. The weightings are secret.
2007, May – China widens the yuan’s daily trading band against the dollar to 0.5 percent from 0.3 percent.
2008, Jul – China’s central bank effectively pegs the yuan against the dollar at 6.83 to help its economy ride through the worst of the global financial crisis.
2009, Jul – China takes a step towards internationalising the yuan by launching a pilot programme that allows selected Chinese regions to pay for imports and exports in yuan.
2010, Jun – China says it is resuming its reforms of the yuan exchange rate and increasing currency flexibility, effectively ditching a two-year peg to the dollar that was enacted during the global financial crisis.
2012, Feb – The yuan hits a record high of 6.2884 per dollar.
2012, Mar – China steps up efforts to internationalise the yuan by allowing all firms in the country to pay for imports and exports in yuan.
2012, Apr – China widens the trading band for the yuan against the dollar to 1 percent from 0.5 percent.
Koh Gui Qing