Tue, Apr 03, 2007 - Page 12 News List

China to maintain stable yuan, keep firm lid on growth


China's central bank said yesterday it would keep the nation's currency, the yuan, stable "at a reasonable level" and allow market forces to play a fundamental role in setting the exchange rate.

The People's Bank of China said in its first-quarter monetary policy committee meeting statement that it would also "reasonably" control the growth of money, credit and investment.

The wording of the statement, published on its Web site, was nearly identical to that issued in the fourth quarter of last year.

"We will further improve the managed floating exchange rate system to make market demand-and-supply play a fundamental role in the yuan exchange rate formation and keep the yuan exchange rate basically stable at a reasonable and balanced level," it said.

The central bank made no specific references to future policy actions, saying only that it would "reasonably control the growth of investment" and "reasonably control the growth of money and credit."

The bank also said that it would strengthen liquidity management and seek price stability.

The central bank would continue a prudent monetary policy and should "make the monetary policy more forward-looking, scientific and effective, and maintain price stability," the report said.

It said that China's economic structure is "not reasonable," a reference to imbalances stemming from the over-reliance on investment and exports.

"The current economic situation is generally good but still faces an unreasonable structure and an international payments imbalance," it said.

In a review of its recent work, the central bank said it "has been using a combination of monetary policy tools to enhance liquidity management, steadily pushed forward interest rate reform and increased exchange rate flexibility."

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