Premier: RMB exchange rate no major contributor to Sino-US trade imbalance
( 2003-11-24 14:05) (Xinhua)
Chinese Premier Wen Jiabao said the increase in China's export was mainly
attributed to its abundant supply of competitive labor and he did not think the
exchange rate of the Chinese currency, the RMB, was an important contributor to
the trade imbalance between China and the United States.
During an interview given to Leonard Downie, executive editor of The
Washington Post, at Zhongnanhai in Beijing Friday, he said the exchange rate of
a country's currency should be set in accordance with its national conditions
and the state of its economic and financial sector.
China first began reforming its exchange rate regime in 1994, when it was
decided that China would adopt a market-based, single, managed floating exchange
rate regime.
"Some people claim the value of the RMB is fixed and has not changed. This
does not square with the facts," he said, adding that more accurately, the band
of fluctuation of the RMB is quite narrow.
Since 1994, the RMB has appreciated in real terms by 18.5 percent against the
US dollar and by 39.4 percent against the euro. In 1997, during the Asian
financial crisis, China withstood pressure for RMB devaluation and since then,
the band of fluctuation of the value of the RMB has been quite narrow, the
premier said.
"There is no denying we still face very daunting tasks in financial and
banking reform," Wen said. "We already allowed our currency to be freely
convertible under the current account in 1996, and it will take a very long
period of time and arduous efforts before we can achieve the objective of a
freely convertible currency under the capital account."
China is definitely going to accelerate reform of the financial and banking
sector. "While we do so we'll explore how to form a rational mechanism in which
the value of the RMB will fluctuate on the basis of market conditions," the
premier said.
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