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China would maintain a stable monetary and yuan policy as it kept a racing economy in check, domestic media quoted a senior central banker as saying Monday, amid speculation the government could move any time to revalue the currency.
But China should keep moving toward more market-oriented interest rates, the Securities Times quoted Wang Yu, secretary general of the country's monetary policy committee, as saying.
The comments from Wang would seem to cool renewed speculation that the government is on the verge of revaluing the yuan.
"The central bank will henceforth do its best to protect the stability of the yuan's exchange rate, laying the foundations for future economic development," Wang was quoted as saying during a financial industry seminar in Beijing over the weekend.
The monetary policy committee is China's policymaking body on interest rates. It consists of finance ministry officials, industry executives and central bankers such as Wang, who became a member of the central bank's pivotal monetary policy department in late 2003.
China, the world's seventh-largest economy, raised interest rates for the first time in nine years last month, triggering talk the government may hasten steps to adopt a market-driven currency and unshackle the yuan, which has been pegged to the U.S. dollar at around 8.28 since the 1997/98 Asian financial crisis.
The rate hike was the latest salvo in a campaign to slow a racing economy, which had in turn worried Asian nations dependent on their giant neighbor for exports.
Economists now reckon a yuan shift could happen any time, since China had shown -- via the rate hike -- it was willing to let market forces steer the economy.
Separately, the China Securities Journal on Monday quoted an unnamed official from the country's forex watchdog as saying the country was deliberating various ways to adjust its exchange rate regime — a repeat of comments made previously.
Top officials have stepped up pledges to make the yuan more flexible, while stressing the need to head off volatility within a country that prizes stability.
Analysts say the government is keen to move to a more flexible yuan to better reflect economic conditions and the balance of payments. But policymakers argue a lot more work needs to be done to build a market-driven system.
Adding to the complexity, China has come under increasing international pressure from the West to free up the yuan. U.S. exporters and policymakers have said China derives an unfair trade advantage from an undervalued currency.
The Chinese Government, meanwhile, has pledged to make the yuan more flexible through reforms — but to do so in its own time and without bowing to pressure from outside.
The yuan, also known as the renminbi, was also coming under upward pressure from massive inflows of foreign currency, the China Securities Journal cited an official from the State Administration of Foreign Exchange as saying.
"Right now there's speculation the yuan could be allowed to appreciate. But that could shift to speculation of a depreciation overnight," the newspaper cited the official as saying.
"For China, it's more important to reform foreign exchange mechanisms, rather than simply revalue the yuan," the official was quoted as saying, without giving further details.
(Xinhua News Agency November 9, 2004)
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