In its second quarter report released yesterday, the People's
Bank of China, the country's central bank, said the range of
movement of the renminbi (RMB) exchange rate will be adjusted at
the "proper time," based on the market situation and economic and
financial circumstances.
It said this would be done on the basis of market supply and
demand and with reference to a basket of currencies, adding that
this would maintain the yuan's basic stability at a reasonable
equilibrium, keep the basic balance of international payments and
safeguard stability of the economy and financial markets.
Since China allowed the yuan to appreciate by a modest 2 percent
on July 21, the trading price between it and US dollar can
fluctuate within 0.3 percent on the inter-bank foreign exchange
market, and that with other currencies within 1.5 percent.
"A revaluation of the renminbi by 2 percent, effective at the
beginning of the exchange rate regime reform, does not in the least
imply an initial move which warrants further actions in the
future," the central bank said.
"Gradualism" is the principle applied in the reform of the
renminbi exchange rate regime, rather than in the adjustment of the
renminbi exchange rate, it added. "The reform is focused not on the
quantitative adjustment of the renminbi exchange rate but on the
improvement of the renminbi exchange rate regime."
According to the report, reform of the exchange rate is designed
to serve China's fundamental interests and benefit the national
economy, enterprises and people's lives in general.
China's GDP and per capita wealth in US dollars went up
correspondingly after the yuan's appreciation by about 2 percent,
the central bank said.
The appreciation has spurred imports and reduced exports, which
may rein-in the runaway growth of China's trade surplus and foreign
exchange reserves, and gradually help fulfill the basic balance of
exports and imports as well as that of international payments, it
said.
This will lead to more efficient use of resources, alleviate
pressure on the renminbi, make monetary policy more independent,
and financial control more active and effective, as well as
maintaining a balanced overall economy, the bank said.
The yuan's appreciation will have a positive impact upon
people's lives, as it will lower the prices of imported goods in
the market and lead to cheaper overseas travel for Chinese people,
it said.??
(China Daily, Xinhua News Agency August 5, 2005)