As China's yuan swings back into the global spotlight, it mightseem like an odd time for authorities in Beijing to loosen theirgrip on the tightly managed currency.

Yet for a growing number of analysts and investors, the prospectof a freely floating yuan — a Chinese exchangerate wholly determined by market forces — is nolonger a distant possibility. Advocates include a government-backedresearcher and a former central bank adviser, while bond-marketpowerhouse Pacific Investment Management Co. says the chances of afree float are rising.

The risks of unshackling China's currency are hard to ignore. Itwould almost certainly lead to a knee-jerk tumble, exacerbatingcapital outflows and sending shockwaves through global markets.Investors around the world took notice of the yuan's elevatedvolatility last week, even as it paled in comparison to everydayswings in many developing-nation peers.