World Bank says big change in Yuan exchange rate not advisable

As reported by Reuters, World Bank country director for China, David Dollar, thinks that big change in Yuan exchange rate may not be advisable.

“For the exchange rate, I have a lot of sympathy for the Chinese government approaching that cautiously," he said. "I agree with the macro-economists who think that it's in China's interests to allow some appreciation of the currency but I respect the government wanting to make that move gradual."

"A big change in the exchange rate really could have unpredictable effects on economic growth," he said.

"In the developing world we often seen these financial crises together with an exchange rate, macro crisis," Dollar added. "I think it's fair to say that's almost impossible in China ... because it's got about $900 billion in reserve." 

Indeed, revaluation of Yuan is in the interest of Chinese government, and I guess that they already realize that appreciation of the currency is key to China's goal of transformation into a domestic-demand-driven economy. It is understanable that they want to do it gradually, not least not to be seen as yielding to American pressures.