The renminbi foreign exchange rate's
trading band could be widened this year but was "sufficient" at the moment,
central bank chief Zhou Xiaochuan said on Monday, March 5.
Zhou Xiaochuan, governor of the
People's Bank of China or the central bank, speaks at an economic forum in
Beijing in this May 24, 2005 photo. Zhou said on March 5 at the ongoing
NPC session that the current yuan flexibility is sufficient.
"I prefer not to comment on the pace (of the exchange rate's adjustment)
because it is determined by the market," Zhou, the governor of the People's Bank
of China (PBOC), told reporters on the sidelines of the annual session of the
National People's Congress.
as the adjustment is determined by supply-demand relationship in the market, it
should be appropriate."
In July 2005, China abandoned the renminbi's decade-old peg to the US dollar
and appreciate the currency by 2.1 percent. Since then, the yuan has gained
almost another 5 percent against the dollar.
The yuan now rises or falls by about 0.3 percent a day against the US dollar,
and by 3 percent against other major currencies.
"The flexibility is sufficient for the moment," Zhou said.
"But I would not rule out the possibility of it being widened when the
current fluctuation range is not sufficient."
In addition to the renminbi's exchange rate, use of the country's hefty
foreign exchange reserves was also a hot topic during the NPC session.
Wu Xiaoling, vice-governor of the central bank, confirmed reports that a
foreign exchange investment company would not be established to tap the
reserves, without elaborating.
However, Guo Shuqing, the former head of the State Administration of Foreign
Exchange, yesterday offered what he regarded as investment strategy for the
operation of the company to be established.
Guo, who is now chairman of the China Construction Bank, said funds of the
company should not be used domestically and should be invested mainly in
financial assets such as bonds.
"It will make no sense if the money is used in the country because that will
equal with new investments in renminbi," Guo, a member of the Chinese People's
Political Consultative Conference (CPPCC) National Committee, said.
Investment targets should be limited to financial assets because the country
has not enough hands to manage the investment if the money is put into
industrial projects, he said.
Guo dismissed reports about him being appointed as a key executive at the
Meanwhile, regulators are aiming to open the country's markets to stock index
futures in the first half of this year.
Fan Fuchun, vice chairman of the China Securities Regulatory Commission
(CSRC), made the announcement in a meeting of the annual top legislative body.
The CSRC had made a systematic research on the issues of fund companies'
involvement in stock index futures, he said, without elaborating.
International financial giants have reportedly been lobbying Chinese
regulators to let them join the first batch of investors to trade the nation's
pioneering stock index futures.
The trade of stock index futures would be launched on the Shanghai-based
China Financial Futures Exchange, CSRC chairman Shang Fulin said in October last
Market watchers believe the introduction of such derivatives could provide
institutions with a much-needed tool to hedge risks, but may also spur
speculation and widen volatility.
The China Financial Futures Exchange, the country's first financial
derivatives exchange, was inaugurated on September 8, 2006.