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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 Co-operation Programme in this city 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 that 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 yesterday with ministers jointly vowing to strengthen co-operation in the programme.
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 co-ordinates the programme 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 neighbour and development partner for countries adjacent to it.
China's rapid economic growth has promoted trade development in the GMS area, he said. Last year, China's trade volume with other five GMS members exceeded US$13 billion, representing an increase of 30 percent over the previous year, he said.
As China develops, "it will come into more active co-operation with other countries and will create more opportunities and conditions for prosperity in the region,'' Tang said.
He said that the GMS co-operation has been fruitful. So far, 100 projects in nine key sectors are being implemented, he said.
China will continue to work together with other GMS members to promote the sub-regional co-operation for the common prosperity, Tang noted.
The ministerial meeting is the latest since the GMS countries' first leaders' summit held in Cambodia in November 2002.
China is to host the second GMS summit in 2005.Ministers will hold next year's meeting in Laos.
(China Daily September 20, 2003)
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