Foreign Exchange News
- Yuan to reflect market fundamentals: banker
Date: 30-Jan-2007 Sources: (Shenzhen Daily)
CHINA'S currency will increasingly reflect market and economic fundamentals, the deputy governor of China's central bank said Sunday.
But the process will be gradual, added Wu Xiaoling, speaking at the World Economic Forum's Annual Meeting in Davos of Switzerland.
'The yuan will reflect market forces,'Wu said.
China's central bank is going to let that happen in a controlled, self-directed way, she added.
China must further develop its domestic financial markets and undertake other economic reforms, Wu said, noting that the government's latest five-year program aims to take steps in that direction.
More rapid action, as some U.S. officials desire, could cause instability not just in the Chinese economy but also international financial markets, she said.
On the domestic front, China's remarkably low inflation, less than 2 percent in 2006 despite economic growth of more than 10 percent, partly reflects State intervention, notably in the form of subsidized energy prices, Wu noted.
China's consumer price index may 'not fully reflect?reality and 'if we let the market play more of a role, inflation may not be so low,'she said.
The process will be gradual, she added. The Chinese Government has a 'very clear vision?of its approach to the exchange rate, she said.
More rapid action could spark disruption both on markets and also in China, which is eager to boost employment in its export-led industries.
'Instability in China is not in the interest of the rest of the world,'Wu said. 'We are walking on ice.'
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