China's currency is expected to remain stable this year, but the exchange rate will be more flexible after the nation's entry into the World Trade Organization (WTO), the central bank chief said on Wednesday.
The renminbi is expected to be underpinned by reasonable economic growth, low inflation and sufficient foreign exchange reserves, said Dai Xianglong, governor of the People's Bank of China, in Beijing.
He predicted the Chinese economy will grow by between 7 and 8 percent this year. The economy grew by 8 percent last year.
The consumer price index, the key barometer for inflation, increased by 1.5 percent in December. Official economists said they expect the index to fluctuate around its current level this year.
China's foreign exchange reserves increased by US$11 billion to US$165.6 billion in 2000, buoyed by increasing exports and other favourable economic indices.
China is expected to become a WTO member later this year.
Dai said trade would experience more changes after China joined the international trade club, which will lead to bigger changes in China's balance of payments.
"We need to develop an (exchange rate) mechanism that is more adaptable to these changes," he said.
A bigger fluctuation range for the renminbi is the most likely immediate option for the central bank in pursuing a flexible exchange rate system.
The price of the renminbi has been moving between 8.2770 and 8.2800 to US$1 for three years, under intervention by the central bank. But the Chinese currency has recently been under pressure to appreciate - a result of surging exports.
Talking about the fate of the international trust and investment corporations (ITICs), Dai said most ITICs that have foreign debts would survive an overhaul.
ITICs were in the spotlight in early 1999 after the Guangdong International Trust and Investment Corp (GITIC) defaulted on foreign loans and filed for bankruptcy. Many other ITICS were also reported to be in a poor financial position.
The issue attracted attention again last year after the Hainan International Trust and Investment Corp failed to pay back its overseas debts on time.
China's financial authorities have been working to rectify the problems in the trust industry since the emergence of the GITIC issue.
Dai said regulations for the industry would be issued in "two or three days."
In the process of cleaning up the industry, some ITICs would be dissolved, he said. But most of the ones that hold foreign debts would be allowed to survive as most of these are major players.
"They will pay back their principal loans and interest to foreign creditors according to their contracts," he said.
(China Daily 01/18/2001)
