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China reaffirms to keep yuan basically stable

Updated: 2010-03-09 11:39
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BEIJING - China will keep the exchange rate of the renminbi, or the country's currency yuan, basically stable at a reasonable and balanced level, Yi Gang, vice governor of China's central bank, said Tuesday.

China will stick to the "established policy" of "steadily advancing the convertibility of yuan under capital accounts" despite the rising global argumentation for the rationality of curbing capital accounts amid financial crisis, said Yi, vice governor of the People's Bank of China.

Yi spoke after a succession of top officials clarified their stances on the yuan policy. Chinese central bank Governor Zhou Xiaochuan said on March 6 that the nation should be "extremely prudent" in changing policies adopted during the global financial crisis, including the exchange-rate link. Premier Wen Jiabao pledged in his government work report on March 5 that the government would keep the yuan "basically stable".

Yi, also director of the State Administration of Foreign Exchange (SAFE), said China is not a currency controller, and it does not force settlement of foreign exchange.

"Many friends have an impression that China imposes currency control and compulsory settlement. Such an impression is actually not right," said Yi at a press conference on the sidelines of the National People's Congress, the country's top legislature.

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China achieved "relatively good" yields from its management over foreign exchange reserves, according to Yi. He said that China has fully considered risk control in the allocation of the currencies and assets, and high-risk products such as subprime mortgages and collateralized debt obligations are not among China's investment list.

China holds the largest foreign currency reserves in the world, which stood at $2.3992 trillion at the end of 2009. 

China will consider investing more of its foreign reserves in gold "cautiously" based on market conditions, Yi said.

China's investment in the treasury bonds of the United States is a market behavior, and should not be politicized, Yi added.

He also said that joint efforts should be made to fundamentally stem hot money inflow.

The central bank is still considering whether to increase the capital injection to the China Investment Corporation, the nation's sovereign wealth fund, said Yi.