China's central bank will gradually ease restrictions on capital flows in a renewed effort to curb its huge trade surplus, according to Wu Xiaoling, deputy governor of the People's Bank of China.

 

"China will ease cross-border capital transactions selectively and gradually under the precondition of effective risk prevention and intensified capital flow monitoring," Wu told a forum in Mumbai, India.

 

She said the bank would broaden the overseas investment channels step by step, adding it was actively nurturing a foreign exchange market to provide more investment instruments for foreign currency holders.

 

The government would also take more measures to boost domestic demand and persuade domestic businesses to import and invest overseas, she said.

 

China's trade surplus surged almost tenfold to US$23.76 billion in February from the same month last year. The surplus jumped 74 percent to US$177.47 billion last year.

 

Wu said the foreign exchange rate of China's currency, the yuan or Renminbi, though important, was one of many factors behind the huge trade surplus, adding the main reason was China's economic growth.

 

Many Western trade partners, including the United States, have been pushing China to allow rapid appreciation of the yuan, alleging its undervaluation has given China an unreasonable export price advantage.

 

The yuan has appreciated more than six percent since China scrapped the peg of 8.28 yuan to US$1 and allowed it to float within a daily 0.3 percent band from the official central parity rate on July 21, 2005.

 

Wu said on Sunday that the government would continue to improve the exchange rate system and allow more flexibility, but imbalances in world trade should not be blamed on the yuan exchange rate.

 

She also said the government would reform the export rebate system and customs policies to address the trade surplus, while maintaining a reasonable level for the exchange rate.

 

(Xinhua News Agency April 5, 2007)