China is slowly moving toward revaluation of the Chinese Yuan. The currency, which is currently fixed to the USD and trades within a narrow band, may soon be allowed to fluctuate freely. China’s Central Bank recently approved 7 (foreign) banks as market makers in the new exchange rate system. The banks will be permitted to make the market in a dozen or so of the most popular currency pairs (i.e. USD/Euro, USD/Yen, etc.). Eventually, these banks will be permitted to make the market in Chinese Yuan. Economists and nation-states continue to urge China towards reforming its exchange rate regime, sooner rather than later. The Economist reports:

How much these moves will accelerate currency reform is uncertain. In a recent interview with the People’s Daily, the party mouthpiece, Zhou Xiaochuan, the central bank governor, said that the priority was to improve its exchange-rate mechanism, not simply to revalue.

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