"We will uphold the current foreign exchange rate system and improve the exchange rate formation system with the prerequisite of maintaining the stability of renminbi's exchange rate." Zhou said.

His remarks, made public yesterday through a bank press release, were a clear response to the debate that has been going on since last year on whether the renminbi is undervalued or overvalued.

China's current foreign exchange rate system is called a "managed floating rate system," which means the exchange rate is based on the supply and demand in the foreign exchange market in Shanghai, but the central bank can influence the market by its selling or buying activities.

The renminbi's value remained stable during the 1997-1999 Asian financial crisis.

Chinese officials and economists have said they believe the current exchange rate is reasonable and a stable renminbi is in the best interests of both China and the global economy.

Zhou also said the central bank would begin to draft its plan for interest rate liberalization, a key part of China's financial reform. "We will push forward the reform of the interest rate administration system at a steady pace," he said.

(Edited by china.org.cn January 27, 2003)