Yuan breaks key 8.0 to the dollar

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China's yuan strengthened to close below the psychologically important eight to the dollar for the first time since last year's revaluation aimed at greater exchange rate flexibility. "There's definitely a trend for the yuan to rise in value in future," said Sun Lijian, an economist at Shanghai's Fudan University. "But it's not going to be as fast as many believe." There is only so much change the Chinese economy can absorb and the banking sector in particular needs a stable environment to carry out much-needed reform, he argued Monday. The yuan ended at 7.9976 to the dollar on the local currency exchange after a parity rate of 7.9982 had been announced by the National Foreign Exchange Center early in the day. In a joint statement after a Sino- European Union financial dialogue Monday, Beijing reiterated that it would continue to free up the yuan but again refrained from revealing the pace. "China will further improve the yuan exchange rate formation mechanism and constantly make the exchange rate more responsive to market supply and demand," the statement said. China will "strengthen aggregate control, improving the credit structure with market instruments, advancing the yuan exchange rate regime and market-based interest rate reform." It is 12 years since the yuan -- under a different foreign exchange regime -- was last traded at this side of the 8.000 level. The strengthening comes amid persistent calls for China to act to cut its massive trade surpluses.