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Central bank to push currency reform
By Shenzhen Daily/Agencies
Updated: 2005-11-17 10:50
China will press ahead with market-orientated currency reforms while keeping
the exchange rate of the yuan basically stable, said Su Ning, a vice-governor of
the People's Bank of China.
Su, in a restatement of the central bank's long-standing policy, told a
conference that the reforms were aimed at making the exchange rate more flexible
and at rebalancing China's economy.
The pace of reform, which would also entail steady progress towards removing
capital account restrictions, would take into account domestic and international
factors, Su said.
"In particular we will let market supply and demand play a fundamental role
in setting the exchange rate, all the while keeping the renminbi's exchange rate
basically stable at a rational and balanced level," he said.
The yuan, also known as the renminbi, has appreciated just 0.33 percent since
it was revalued by 2.1 percent against the dollar in July and allowed to float
in tightly managed bands.
China's trade surplus has since continued on a rising trend and hit a record
US$12 billion in October.
Su said a more flexible exchange rate would play a role in adjusting China's
balance of payments and in achieving a better balance between the domestic and
export sectors of the economy.
As a large developing country, China needed to emphasize domestic demand, Su
said.
Su said China's swelling current account surplus reflected a high savings
rate of more than 45 percent of gross domestic product, which in turn partly
reflected the country's underdeveloped financial markets.
A constant complaint of central bank officials is that because of a dearth of
investment products and scant attention to returns, banks are unable to generate
high yields for their depositors, thus prompting them to save even more.
To that end, Su said the authorities were striving to complete the
restructuring of the country's big four banks by the end of 2006, when China
must open domestic yuan business to foreign competition in line with pledges
made when it joined the World Trade Organization in 2001.
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