Chinese Premier Wen Jiabao met the press

Premier Wen Jiabao said Monday that China would continue to gradually increase the flexibility of its exchange rate while taking into consideration the pressure on enterprises and employment, which is important to social stability. [More about Premier Wen's press conference]

"The appreciation of the RMB must be gradual, because it affects jobs and raises pressure on enterprises and employment, and we must maintain the overall social stability," said Wen.

"We will continue to stick to the reform of the formation mechanism of the RMB exchange rate," Wen told a press conference after the conclusion of the annual parliamentary session.

The Chinese currency has appreciated 57.9 percent from the level of 1994. Since that year, China has conducted three major reforms on the RMB's exchange rate formation mechanism, he said.

"Our reforms have aimed to adopt a market-based, managed floating exchange rate regime which is tied to a basket of foreign currencies instead of pegging to the U.S. dollar," Wen said.

As for tackling the current inflation, Wen said, "the government has confidence to anchor inflation expectations."

The measures are three-fold, the premier said. The first is to boost production, especially agricultural produce supply. The second is to strengthen goods distribution, especially the weak link of agricultural goods distribution. The third is to use economic and legal means to manage the market.

In terms of the causes of inflation, Wen said China has both imported and structural inflation.