Moderate appreciation of RMB right for economy

Updated: 2006-12-17 10:23

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

Fan said that the major problem in the world capital market was the excessive amount of U.S. dollars, which has led to its devaluation. Renminbi (RMB) appreciation not only helps strike out at market speculations, but is also beneficial to maintaining a stable economy.

As the value of the RMB against the U.S. dollar hit a record high on Friday with a central parity rate of 7.8185 yuan to one dollar, the Chinese currency has risen by 3.73 percent since China's reform of the exchange rate system on July 21, 2005.

Fan rejected comments that the daily 0.3 percent band from the official central parity rate was not wide enough and insisted it did not need to be adjusted.

At the first session of the China-France financial and economic forums in Beijing in September this year, Zhou Xiaochuan, governor of the People's Bank of China, said there was no timetable for a further widening of the daily floating band between the RMB and the U.S. dollar.

Fan Gang said that the current exchange rate is healthy and in line with the economic conditions of the country.

As for China's one trillion yuan-plus foreign exchange reserve and the high trade surplus which has caused deep concern around the world, Fan said that the appreciation of the RMB alone could not solve the problems. China's external economic balance is a complex issue, which needs the adjustment of the economic structure and not just the appreciation of the RMB, he said.

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