China opposes all forms of secessionist activities

The Chinese mainland will unite with Taiwan compatriots in firm opposition to all forms of secessionist activities, such as calls for "Taiwan independence" through legislation, said Wen.

"We will remain committed to the basic principle of peaceful reunification and 'one country, two systems' and vigorously expand exchanges and cooperation between the two sides," said Wen.

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The mainland will continue to step up dialogue and exchanges on the basis of one-China principle with all political parties in Taiwan that advocate development of cross-strait relations, said the premier.

Relations across the Taiwan Strait will face severe challenges this year, as the Taiwan authorities' efforts to seek "de jure independence" through the so-called "constitutional reform" might enter a "substantive" stage, Jiang Enzhu, spokesman for the NPC session, said earlier at a press conference.

A series of "de-sinicizing" moves recently adopted by the Taiwan authorities in an apparent push for secession showed strains on the relations between the mainland and Taiwan were lurking around, Jiang said.

The election of Taiwan's "Legislative Yuan" at the end of this year and the Taiwan leader election in 2008 are expected to bring changes to the political environment on the island.

Trade Surplus

China will strive to reduce its " excessively large" trade surplus to ensure the sustained development of both domestic economy and foreign trade, said Wen.

China recorded a sizzling economic growth of 10.7 percent in 2006, largely powered by strong exports, which rose 33 percent to 86.62 billion U.S. dollars.

Despite a slight 1.2 percentage points down in export growth and 2.4 percentage points up in import growth, China's trade surplus last year expanded to a record 177.5 billion dollars, up 74 percent from the previous record of 101.9 billion dollars set in 2005.

The surplus kept surging 67.3 percent in January from a year ago to 15.88 billion U.S. dollars, a dangerous level to ignite inflation and aggravating already tense trading relations between the world's fourth largest economy and its major trade partners, which press China for further currency appreciation.

To reduce the hefty trade imbalance, the premier said the government will support export of high value-added products and products with Chinese trademarks, promote the upgrading of the processing trade and expand the export of service and agricultural products, while limiting exports of products whose manufacture is highly energy consuming or highly polluting.

For the part of imports, Wen stressed that imports of energy, raw materials, advanced technologies and equipment, and key spare parts and accessories will be bolstered.

The premier promised China will keep improving the mechanism for setting the Yuan exchange rate, easing the imbalance in international payment and optimizing foreign investment environment.

RMB exchange rate

Wen said the nation will improve the mechanism for setting the RMB exchange rate and seek ways to use the massive state foreign exchange reserves appropriately.

The RMB value has risen by more than six percent since July 21, 2005, when the Chinese government launched the reform of exchange rate system to allow the yuan to float against the U.S. dollar within a daily band of 0.3 percent around the official central parity rate.

The central parity of RMB against the U.S. dollar was 7.7453 yuan per U.S. dollar on March 2, compared with the rate of 8.28 yuan per U.S. dollar before the reform.

"We will improve the mechanism for setting the RMB exchange rate, strengthen and improve foreign exchange administration, and actively explore and develop channels and means for appropriately using state foreign exchange reserves," Wen said.

RMB exchange rate might appreciate by five percent in 2007, according to a Xinhua Economic Analysis Report, a regular product by a team of more than 80 economic analysts working with Xinhua Economic Information Department, released at the beginning of this year.

The report held that the short-term RMB exchange rate will be influenced by the fluctuation between the dollar and other currencies, but in the long run, it depends on the progress of China's exchange rate reforms. Stable appreciation in small steps is generally expected.

The foreign exchange policy is in line with the pace of China's economic development and the daily floating band is enough to allow sufficient appreciation of the RMB, said well-known Chinese economist Fan Gang.

The major problem in the world capital market was the excessive amount of U.S. dollars, which has led to its devaluation. RMB appreciation not only helps strike market speculation, but is also beneficial to maintaining a stable economy, according to Fan.

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