China weakens yuan amid economic slowdown

China's central bank announced Tuesday it was lowering the reference rate for the yuan against the US dollar.

The move comes amid slumping trade figures and is designed to make China's exchange rate regime more market-oriented, according to the bank.

The People's Bank of China (PBoC) said it was setting the so-called "central parity" for the yuan at 6.2298 to $1, compared to 6.1162 yuan the day before, a nearly 2-percent reduction that marked the yuan's biggest decline in a decade.

The announcement comes after July exports contracted by a margin of 8.3 percent, potentially due to a strong yuan that makes Chinese goods more expensive in overseas markets.

The central bank did not use use the term devaluation to describe the move, saying it would "comprehensively consider the supply and demand of foreign exchange" as well as the latest international market rates for foreign currencies in order to set the value of its currency.

China is promoting the yuan and seeking to have it included in the International Monetary Fund's basket of reserve currencies which include the euro, the US dollar, the British pound and the Japanese yen.

But the IMF has thus far been skeptical of including the yuan in the group, saying that while it meets the criteria of being a currency used for large-scale exports of goods and services, other conditions are problematic.

Among other things, the yuan has remained tightly controlled by the government in Beijing which has been a thorn in the side of the US as the IMF's largest shareholder. Washington has long accused China of keeping the yuan undervalued to boost exports.

The last time the IMF's reserve currency basket was modified was in the year 2000, when the euro replaced France's franc and Germany's deutschmark.

bw/kms (AFP, AP)