Pegging the yuan to a basket of trade-weighted currencies will give the mainland a more flexible currency regime but not solve the imbalance in Sino-US trade, investment bankers at the Fortune Global Forum said yesterday.
Some also voiced concern that more flexibility would be accompanied by volatility.
Stuart Gulliver, chief executive of corporate investment banking and markets at HSBC, said the trade-weighted currency regime would bring greater flexibility.
The weightings did not need to be publicised, as with the Singapore dollar, which used to be pegged to an undisclosed trade-weighted basket.
Goldman Sachs Group vice-chairman Kenneth Courtis said a 5 to 10 per cent appreciation of the yuan would be appropriate.
But the danger of loosening the yuan's peg to the US dollar lay in market expectations of a further upward adjustment, Mr Gulliver said, which would, by itself, create more volatility.
The lack of a hedging mechanism for the yuan was a problem faced by foreign investors, who were not in the speculative business, said Jack Rodman, a partner at accounting firm Ernst & Young.
