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A deputy governor of the People's Bank of China said yesterday that there is no real economic reason for China's currency to appreciate although the country's foreign exchange reserves have been swelling.
"On the economic level, the renminbi is not under pressure to appreciate," Wu Xiaoling told the China Business Summit. The three-day meeting, an annual event co-organized by the Davos-based World Economic Forum and China Enterprise Confederation, opened yesterday.
A currency strengthens when the country's economy become substantially stronger, Wu said. But she did not see major changes in the strength of the Chinese economy relative to the world economy in the near future, she said.
Since 1997, when the Asian financial crisis started, it has been routine in the public appearances of senior officials of the central bank to say that the value of the yuan is to remain stable.
But this time, Wu Xiaoling was not dealing with concerns about the yuan being devalued.
China's rapid economic growth and strong position internationally have made any concern about the yuan depreciating unnecessary.
However, the country's hefty forex reserves, growing by a year-on-year 29 per cent to US$228 billion by the end of March, have triggered speculation that the yuan may appreciate in value.
"The accruing of forex reserves is mainly caused by the regulators' control of demand," Wu said.
China's exporters are required to sell their hard currency income to the banks.
But importers need to show buying documents to buy foreign exchange. Demand for foreign currencies for other purposes such as travelling are only partly met. Conversion of yuan to hard currencies for investment must first be approved by relevant authorities.
Wu said that the forex reserves would not be so huge if restrictions were less strict.
But she did not say if the restrictions would be relaxed. She just repeated the official line of the central bank that they would "improve the renminbi's exchange rate formation mechanism under the precondition of the renminbi's stability."
(China Daily April 19, 2002)
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