The latest move to tighten monetary policy is expected to help pave the way for a faster appreciation of the yuan, dealers said.

The yuan ended at 7.4030 on Friday, a rise of 5.43 percent this year so far.

China will shift its monetary policy to a "tight" from a 10-year "prudent" stance to fight inflation and curb credit to prevent overheating from occurring, the central government said last week at its annual central economic conference.

With the policy change, interest rate rises, higher bank reserve requirement and the appreciation of the yuan are expected.

As central banks of other countries, including the United States, are cutting interest rates, China is also reluctant to raise its interest rates to avoid a capital influx into the country.

(Shanghai Daily December 10, 2007)