China to improve setting of RMB exchange rate

(Xinhua)
Updated: 2007-03-05 09:54

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

Wen made the statement while delivering a government work report at the opening of the Fifth Session of the Tenth National People's Congress, the top legislature.

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.