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Chinese Premier Wen Jiabao said Friday that the reform of the RMB exchange rate is a process of gradual improvement.
Wen told Rodrigo Rato, Managing Director of the International Monetary Fund (IMF), that to gradually establish a market-based and well-managed floating exchange rate system and to keep the RMB exchange rate basically stable at a reasonable and balanced level is the "unalterable direction" and goal of China's exchange rate reform.
"This is a process of gradual advancement and improvement," Wen said.
Wen said China will continue to advance the exchange rate reform with the principles of independent initiative, controllability and gradual progress and the reform will also proceed from the necessity to maintain the development and stability of China's economy and finance.
On July 21, the People's Bank of China, China's central bank, announced that China's currency, the RMB yuan, will be traded at a rate of 8.11 to the US and the yuan to US dollar pegging system is switched to a basket of foreign currencies.
Wen said such a move marked a significant step and a substantial progress in China's exchange rate reform.
He said China has, by taking the step, improved the formation system of the exchange rate and adjusted the exchange rate within a reasonable band.
Wen said the yuan to US dollar pegging system has been switched to a managed floating exchange rate regime based on market supply and demand with reference to a basket of foreign currencies.
Since July 21, the yuan has appreciated by nearly 2 percent against the US dollar.
Wen said such an adjustment is taken with the consideration of China's trade and economic development and Chinese companies' affordability and adaptive capacity.
He said the floating band of the yuan is increasing to some extent within the past two months and China's financial market is operating smoothly.
"Generally speaking, this reforming step is successful," Wen said.
The Chinese Premier noted that the most important thing at present is to deepen the results of the exchange rate reform and to improve services in relevant fields.
That includes improving the foreign exchange market and providing more financial services to enterprises to avoiding risks, improving the adjustment mechanism of the RMB exchange rate and intensifying supervision of cross-country capital flows to ensure the smooth operation of the new exchange rate mechanism, Wen said.
"With the deepening of China's financial reform, economic development and the enforcement of the market role, the RMB exchange rate will become more flexible and serve as a more sensitive reflection of the changes of market supply and demand," Wen said.
He said China's reform of the exchange rate has to take into account both the stability of China's economic and financial growth and any possible influence to the economy of surrounding countries and world finance.
Wen said the long-term stable development of China's economic and financial development will benefit the whole world.
He said China is ready to continue to share information and exchange views with the IMF on the issues of the RMB exchange rate.
Rato is in China for a two-day G20 meeting of financial ministers and central bank governors, which is scheduled to open in Xianghe town, some 50 kilometers (30 miles) east of the Chinese national capital.
(Xinhua News Agency October 15, 2005)
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