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China Pursues Gradual Reform of RMB Rate

Chinese Premier Wen Jiabao said Sunday China must uphold the principles of independent initiative, controllability and gradual progress in pursuing RMB exchange rate reform.


"By 'independent initiative,' we mean to independently determine the modality, content and timing of the reform in accordance with China's needs for reform and development," said the premier when addressing the opening ceremony of the Sixth ASEM Finance Ministers' Meeting, held in Tianjin, a port city in north China.


In the exchange rate reform, the premier said, China should take account of its possible impact on the country's macro-economic stability, economic growth and job market, give consideration to the state of the financial system, the level of financial regulations, resilience of the enterprises and effect on foreign trade and keep an eye on the economic and financial performance of the neighboring countries and regions, and of the world as a whole.


"By 'controllability,' we mean to properly manage the changes in RMB exchange rate at the level of macro-regulations. We must push forward the reform but always stay on top of the challenges, so as to prevent fluctuations in the financial market and economic instability."


"By 'gradual progress,' we mean to push forward the reform in a step-by-step manner. We must take into consideration both the present needs and the future development and guard against undue haste."


"In short, we need to continue improving the RMB exchange rate forming mechanism and develop an exchange rate system that is more market-oriented and more flexible."


However, the premier said, since this reform involves a wide range of areas and will have a far-reaching impact, it still requires a great deal of preparation to help create an enabling environment for all sides to sustain the possible impacts.


Such a responsible attitude and practice of China will contribute to the stability and development of not only Chinese macro-economy but also the economy of the surrounding countries and the larger world, the premier said.



Stable RMB exchange rate in interests of all


Chinese Premier Wen Jiabao said Sunday that keeping RMB exchange rate basically stable at a reasonable and balanced level is in the interests of economic development not only in China but also in neighboring countries and region as a whole.


Wen said maintaining the RMB exchange rate basically stable at a reasonable and balanced level also contributes to the world financial stability and expansion of trade.


"This point was well illustrated during the Asian financial crisis in 1997, when the stable RMB helped alleviate the pain on our neighboring countries and regions and contribute to economic and financial stability and development in Asia and the whole world," Wen said.


Policy suitable to national conditions


Chinese Premier Wen Jiabao said Sunday that China is entitled to choose its currency (RMB) exchange rate mechanism and policy suitable to its own national conditions.


"It is the common understanding in the world that every country is entitled to choose the exchange rate mechanism and policy suitable to its own national conditions," said Wen.


Back in the early 1990s, China set its targets and tasks for the reform of RMB exchange rate mechanism, which is to gradually establish a market-based and well-managed floating exchange rate system so as to keep the RMB exchange rate basically stable at a reasonable and balanced level, said the premier.


Over the past decade and more, China has done a lot on the reform of the RMB exchange rate mechanism and made important progress, he added.

Premier Wen Delivers a Speech at the Opening Ceremony of 6th ASEM Finance Ministers' Meeting

(Xinhua News Agency June 26, 2005)

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