During the 11th Five-Year Plan period (2006-2010), the Renminbi (RMB), China's currency, is expected to appreciate by two to eight percent annually, the Shanghai Securities News quoted a report from the People's University of China as saying on Monday.

China raised the value of the yuan by two percent to 8.11 per U.S. dollar and started linking it to a basket of currencies on July 21, 2005, scrapping the yuan's decade-long peg to the dollar. The yuan has since risen by more than three percent.

The yuan has recently breached the psychologically important barrier of eight yuan to the U.S. dollar. According to the middle price announced by the China Foreign Exchange Trading System on Monday, one dollar was equal to 7.9924 yuan.

Yu Yongding, a member of Chinese central bank's monetary policy committee, also said previously that the RMB will witness an obvious appreciation trend in 2007, and is likely to appreciate by a large degree.

Yu attributed the yuan's appreciation to two major factors, which is the short supply of RMB and possible devaluation of the U.S. dollar this year.

As a nation with the largest foreign exchange reserve in the world, China is increasing the issue of central bank bonds to restrain the rapid growth of its basic currency, which will cause tight supply of RMB, he said.

As the RMB is linked to a basket of foreign currencies, literally a change of any currency in the basket is likely to bring a change in the rate of yuan to dollar and other major currencies, he said.

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