More efforts needed to push for marketization of the yuan's benchmark deposit interest rates in face of speculative capital

The yuan rose 0.77 percent in April and 0.66 percent in May against the US dollar, much higher than 0.26 percent it rose altogether in the previous three months. The April and May rises were also higher than that for the whole of 2012.

The considerable appreciation has been largely attributed to the short supply of the yuan in the foreign exchange market, directly causing a rise in China's newly increased funds outstanding for foreign exchange. The monthly volume of the country's newly increased funds outstanding for foreign exchange was 683.7 billion yuan ($110 billion) in January, 295.4 billion yuan in February, 236.3 billion yuan in March and 294.4 billion yuan in April. The sharp rise in these funds has been driven by both the large-scale influx of international capital and the increased dollar-to-yuan conversions by domestic households and enterprises because of expectations that the yuan will appreciate. Due to a huge surplus in its international payment, China's newly increased foreign reserve in the first quarter was $157.1 billion.