China Forex Regulator: CNY Reform Shouldn’t Affect Stability
April 27, 2008hina Forex Regulator: CNY Reform Shouldn’t Affect Stability
BEIJING -(Dow Jones)- China’s government will consider domestic economic stability before deciding the timing and method of the next stage’s reform on the yuan exchange rate mechanism, said a senior official at the State Administration of Foreign Exchange Sunday.
Sun Lujun, a vice director-general of the Capital Account Department of SAFE, said any decisions should take into account possible impact on China’s economic growth and employment.
Sun, speaking at an annual conference addressing China’s import and export policies, predicted China’s economy is likely to expand by around 10% this year, above the annual official target of 8% for 2008.
China’s government has said it aims to take steps to prevent both risks of economic overheating and a sharp economic slowdown this year.
Sun said China still faces prominent problems of external trade imbalances, which "showed no signs of easing" in the first quarter. Also, the U.S. subprime mortgage crisis, which caused U.S. economic growth to slow down, added to the yuan’s appreciation pressures, he said.
He said he expected the yuan exchange rate will continue to be affected by domestic and international factors.
He declined to forecast on the trend of the yuan exchange rate in the months ahead.
Sun said the government aims to prevent any exchange rate reform from causing big swings on the financial market. Meanwhile, Beijing will also consider the ability of various industries of coping with any yuan mechanism changes.
His comments mostly reiterated the government’s stance about keeping a gradual and controllable approach in yuan reform rather than making any drastic changes.
Sun suggests export and import companies flexibly use a combination of U.S. dollar and non-dollar currencies for trade settlements as well as use risk hedging tools to prevent exchange rate risks.
This year, SAFE plans to further ease controls on the availability of foreign currency funds to be used for Chinese companies’ overseas investments, said Sun.
He said SAFE will further improve management of forex reserves, at $1.68 trillion at the end of March, but declined to elaborate on the issue.
-Victoria Ruan contributed to this story, Dow Jones Newswires; 8610 6588-5848; victoria.ruan@dowjones.com
(END) Dow Jones Newswires
