China to gradually push forward yuan reform
(AFP)
Updated: 2005-11-07 22:15

China's central bank reiterated it will gradually push forward reform of its float currency regime while keeping its exchange rate at a "reasonable and balanced level".

A currency trader counts yuan banknotes in Beijing. China's central bank reiterated it will gradually push forward reform of its managed float currency regime while keeping its exchange rate at a 'reasonable and balanced level'. [AFP]

"We will gradually push forward reform of the exchange rate mechanism, establish a market-oriented, managed floating exchange rate system and maintain the basic stability of the yuan at a reasonable and balanced level," the central bank said on its website.

The People's Bank of China stressed that a "stable currency value would help to maintain financial stability".

"China's active exchange rate reform, sound international balance of payments, ample foreign exchange reserves and gradual opening of the capital account have provided a good external environment for China's financial stability," the bank said Monday.

China's major trade partners, especially the United States, have been pressuring Beijing to allow more flexibility into the regime following the scrapping of a peg to the US dollar and a 2.1 percent revaluation on July 21.

The yuan closed Monday at 8.0877 yuan to the dollar, compared with the initial revaluation rate of 8.11.

The bank also said it would continue to carefully watch changes in the global economy, "including the negative impact on the global financial stability from US interest rate hikes, surging oil prices and trade frictions."

Further liberalisation of China's interest rate regime and speeding up the reform of financial institutions were also on the table, it said.

To maintain stability the economy needs to be rebalanced, away from investment and exports, it said, adding that lessening local governments' debt burdens and reliance on the banking system for credit were also crucial.