xchange rate range to adjust at proper time

    xchange rate range to adjust at proper time

    China will adjust the float range of its currency exchange rate at the proper time based on market situation and economic and financial circumstances, said a report released yesterday by the People's Bank of China, the central bank, on monetary policy in the second quarter of this year.

    According to the domestic and international economic and financial circumstances, the central bank will manage the yuan's exchange rate on the basis of market supply and demand and with reference to a basket of currencies.

    This will maintain the yuan's basic stability at a reasonable equilibrium, keep the basic balance of international payment as well as safeguarding the stability of the macro-economy and financial market.

    After China unexpectedly allowed its currency, the yuan, to appreciate by a modest 2 per cent on July 21, the trading price between US dollars and yuan can fluctuate within 0.3 per cent in inter-bank foreign exchange market, and the trading price between non-US dollars and yuan can be fluctuated within 1.5 per cent.

    "A revaluation of renminbi by 2 per cent, effective at the beginning of the exchange rate regime reform, does not in the least imply an initial move which warrants further actions in the future," the central bank announced solemnly.

    Reform of the RMB exchange rate regime has been proceeded in an active, controllable and gradual way, the central bank said.

    "Gradualism" is the principle applied in the reform of the renminbi exchange rate regime, rather than in the adjustment of the renminbi exchange rate, it said.

    "The reform is focused not on the quantitative adjustment of the renminbi exchange rate but on the improvement of the renminbi exchange rate regime."

    According to the report, reform of the renminbi exchange rate is designed to serve China's fundamental interests and benefit the national economy, enterprises and people's lives in general.

    China's gross domestic product (GDP) and per capita wealth in terms of US dollars went up correspondingly after the yuan's appreciation by about 2 per cent, the central bank said in its report.

    The appreciation has spurred imports and reduce exports, which may rein-in the runaway growth of China's trade surplus and foreign exchange reserves, and gradually help fulfil the basic balance of exports and imports as well as the balance of international payments, the bank said.

    This will lead to more efficient use of resources, alleviate pressure on the renminbi, make monetary policy more independent, and financial control more active and effective, as well as maintaining a balanced overall economy, it said.

    The yuan's appreciation will have a positive impact upon people's lives, as it will lower the prices of imported goods in the market and lead to cheaper overseas tours for the Chinese people, it said.  

 

 

Source: China Daily

(2005-8-9)

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