Yuan banknotes are being counted in Beijing. China will keep
its currency, the yuan, at a stable and reasonable level, the central bank
said after its last key policy-making meeting before 2007.
China's central bank said on Monday that it would continue to take steps to
keep investment and credit growth in check and maintain a stable monetary
brief statement on its Web site (www.pbc.gov.cn) summing up the proceedings of a
meeting of its monetary policy committee, the People's Bank of China said that
while the economy was generally functioning well, it still encountered some
"The economic situation is good overall, but it still faces problems such as
an structural imbalances, an overly resource-intensive growth model and
imbalanced international payments," the central bank said.
It said that it would continue to implement a stable monetary policy. It did
The central bank has raised interest rates twice this year and banks' reserve
requirement ratios three times, as part of a broader campaign to rein in a
credit-fuelled investment boom. That campaign has also involved administrative
measures such as stricter approval procedures for new investment projects.
In response, annual growth in fixed-asset investment slowed to 26.6 percent
in the first 11 months from a peak of 31.3 percent in the first half.
The central bank also reiterated its long-standing vow to allow market forces
to play a greater role in determining the value of the yuan, while keeping the
currency "basically stable at a reasonable, balanced level."
Since it revalued the yuan by 2.1 percent and decoupled it from a dollar peg
in July 2005, Beijing has frequently said that it was committed to letting the
yuan become more flexible over time.
The yuan has now appreciated a further 3.7 percent since the revaluation,
with the pace having picked up in recent months, but many U.S. critics say it
remains seriously undervalued, giving Chinese exports an unfair advantage in
The central bank also said that it would actively promote domestic
consumption, while working to keep prices stable. It did not mention any details
of such plans.
Many economists and officials have said that the economy relies too much on
fickle investment and exports, and not enough on household consumption, exposing
it to greater risks of a downturn and contributing to trade friction.