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Premier rules out surprise adjustment of yuan

(Xinhua)
Updated: 2006-09-08 10:43

Beijing -- The floating of the RMB exchange rate will be mainly determined by market supply and demand and there will be no more "surprise" adjustments, said Chinese Prime Minister Wen Jiabao on Tuesday.

Wen's comments came at a joint interview with European media before his visit to Finland, Britain, Germany and Tajikistan between September 9 and 16, spending part of his trip attending the ninth China-EU Summit and the sixth Asia-Europe Meeting.

China's foreign exchange reserves have increased considerably in recent years, Wen said. "This has improved the country's overall national strength, international payment capability and its ability to fend off risks, " Wen continued.

But he also admitted that a rapid and continued increase has caused the excessive buildup of foreign exchange reserves in the central bank and oversupply of basic currency.

In recent years, the Chinese government has expanded the use of foreign exchange reserves by increasing imports of products and advanced technology, using part of the foreign exchange reserve to support monetary reform and enterprise reform, reorganization and restructuring, relaxing restrictions on the use of foreign exchange by Chinese enterprises and citizens, and increasing assets purchase.

China's central bank announced on July 21 last year that the exchange rate of US dollars to RMB would be changed to one dollar to 8.11 yuan.

The RMB exchange rate has both risen and fallen, Wen said, adding that the value of RMB has appreciated by a small margin, and RMB has risen by close to four percent against the dollar.

"China will continue its efforts to increase the flexibility of the RMB exchange rate gradually," Wen said.