China Severs Its Currency's Link to Dollar

By Peter S. Goodman
Washington Post Foreign Service
Thursday, July 21, 2005; 9:27 AM

SHANGHAI, July 21 -- China on Thursday said it would allow the value of its currency, the yuan, to increase slightly on foreign exchange markets, while also abandoning its decade-old fixed exchange rate to the U.S. dollar in favor of a rate pegged to a broader basket of world currencies.

The evening announcement on Chinese state television accompanied a statement from the country's central bank, delivering the first concrete progress toward allowing the yuan, also known as the renminbi, to float freely with the whims of world markets -- something China's leaders have long said they plan to do eventually, without offering a timetable.