The director for the Asian Development Bank (ADB)'s China
operations Friday said that China should be careful in sequencing
the process of liberalizing the exchange rate of its currency, the
renminbi.
"The lessons from the (1997) Asian financial crisis indicate
that when you sequence your financial reforms, you should first
strengthen the domestic financial sector," Bruce Murray told a
press conference on Friday at the 12th Ministerial Conference of
the Greater Mekong Subregion (GMS) Economic Cooperation Program in
southwest China's Yunnan
Province.
Murray cited criteria used by the International Monetary Fund
for a currency's eligibility to become fully convertible and said
China is still not yet there.
The renminbi is now convertible under the currency account,
which covers mainly trade, but is not convertible under the capital
account, which mainly concerns investments.
He said China is now about half of the way towards meeting all
the criteria for opening its capital accounts, which is of decisive
significance for floating a currency's rates.
He supports the country's approach of moving gradually towards
liberalizing its currency. A step-by-step method is necessary for
controlling risks, he said.
Murray also said China should not announce its timetable for
liberalizing its currency, noting that by doing so it could prompt
rampant speculation on the yuan.
To announce the timetable would be inappropriate because there
are always many uncertainties in the economy. But the government
should take steps in liberalizing the currency according to how the
economy develops, he said.
The two-day GMS conference closed on Friday with ministers
jointly vowing to strengthen cooperation in the program.
Initiated in 1992, the effort is designed to build closer
economic relations and eventually to comprise a common market in
the area through which the Lancang River (called the Mekong River
outside of China) flows.
The ADB coordinates the program for the six nations involved in
the collaboration, including Cambodia, China, Laos, Myanmar,
Thailand and Viet Nam.
Addressing yesterday's meeting, China's State Councillor Tang
Jiaxuan said China will be a good neighbor and development partner
for countries adjacent to it.
China will continue to work together with other GMS members to
promote sub-regional cooperation for common prosperity, Tang
noted.
(China Daily September 20, 2003)