The director for the Asian Development Bank (ADB)'s China operations Friday said that China should be careful in sequencing the process of liberalizing the exchange rate of its currency, the renminbi.
"The lessons from the (1997) Asian financial crisis indicate that when you sequence your financial reforms, you should first strengthen the domestic financial sector," Bruce Murray told a press conference on Friday at the 12th Ministerial Conference of the Greater Mekong Subregion (GMS) Economic Cooperation Program in southwest China's Yunnan Province.
Murray cited criteria used by the International Monetary Fund for a currency's eligibility to become fully convertible and said China is still not yet there.
The renminbi is now convertible under the currency account, which covers mainly trade, but is not convertible under the capital account, which mainly concerns investments.
He said China is now about half of the way towards meeting all the criteria for opening its capital accounts, which is of decisive significance for floating a currency's rates.
He supports the country's approach of moving gradually towards liberalizing its currency. A step-by-step method is necessary for controlling risks, he said.
Murray also said China should not announce its timetable for liberalizing its currency, noting that by doing so it could prompt rampant speculation on the yuan.
To announce the timetable would be inappropriate because there are always many uncertainties in the economy. But the government should take steps in liberalizing the currency according to how the economy develops, he said.
The two-day GMS conference closed on Friday with ministers jointly vowing to strengthen cooperation in the program.
Initiated in 1992, the effort is designed to build closer economic relations and eventually to comprise a common market in the area through which the Lancang River (called the Mekong River outside of China) flows.
The ADB coordinates the program for the six nations involved in the collaboration, including Cambodia, China, Laos, Myanmar, Thailand and Viet Nam.
Addressing yesterday's meeting, China's State Councillor Tang Jiaxuan said China will be a good neighbor and development partner for countries adjacent to it.
China will continue to work together with other GMS members to promote sub-regional cooperation for common prosperity, Tang noted.
(China Daily September 20, 2003)