Newly-appointed central bank chief Zhou Xiaochuan pledged China
will maintain the value of its currency.
Zhou, who took over as People's Bank of China governor last month,
told a banking working conference in Beijing on Friday, "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."
His remarks, made public Sunday 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 crises.
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 said the central bank's approach to foreign exchange
administration will be improved. The central bank will strengthen
its analysis, monitoring and research on China's international
payments, he said.
The foreign exchange authorities will also support overseas
investment by internationally competitive Chinese enterprises. "We
will encourage such enterprises to go out," Zhou said.
The administration of companies' foreign borrowing activities will
also be streamlined, he said.
Zhou also told the conference the central bank will stick to its
prudent monetary policy to lend its support to rapid and healthy
economic growth. He offered his predictions of money supply growth
rates for 2003, stating that both the broad M1 and narrow M2 are
expected to expand by around 16 percent this year.
M1
and M2 are key official barometers for money supply. M1, which
covers cash in circulation and institutional demand deposits, and
all sorts of deposits, grew 16.82 percent last year. M2, which
covers cash in circulation and all sorts of deposits, grew
16.78.
Zhou 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.
Zhou singled out credits for real estate projects when talking
about commercial banks' business. He said the central bank would
urge commercial banks to improve their risk management in this
sector.
(China Daily January 27, 2003)