“The NAM has almost single-handedly put this issue on the front burner and has been pressuring for greater Chinese currency flexibility for almost two years,” said NAM president John Engler. “We are pleased that China has now moved away from a fixed dollar peg to what could be described as a ‘crawling peg’ based on a basket of currencies.

“China’s new currency system offers the possibility for continued upward movement of the yuan in the coming weeks and months, and that is what we will be looking for,” Engler said.

“While the initial 2.1% revaluation is inadequate, we view it as the beginning of what should be a significant revaluation” Engler said. “China’s new system appears to allow re-valuing the yuan as much as three-tenths of a percent each day — meaning it could move a much as one percent every three days.

“By October, when the next Treasury Department report on currency manipulation is due, we hope to see that China’s currency has moved significantly enough to begin correcting long-standing trade distortions.

“Today’s announcement by the Chinese authorities has the potential for beginning to correct the huge trade imbalances that have been created by distorted currencies – or it fall short if the crawling peg is operated too cautiously,” said Engler. “But for now, we are pleased that the fixed peg is gone and that a new system has been created. We hope everyone will join us in urging China to use it in a manner that truly reflects market pressures.

“China’s move will also help address our larger trade deficit with all Asia. The Chinese yuan has been holding down other Asian currencies, and the NAM has believed that Chinese action would result in upward movement of the other currencies as well,” Engler said. “Malaysia’s announcement that it will also break its peg to the dollar is, we hope, just the first of many similar announcements to come.”

“I commend President Bush and Treasury Secretary John Snow for their resolution and strong leadership,” Engler said. “Their steadfastness made this day possible.”