Since the start of last year, rumors that the central bank would revalue the yuan emerged occasionally and were largely prompted by foreign government officials or observers' comments saying that the Renminbi is undervalued and that China should allow more flexibility for its currency.

Recent talk at the G7 finance minister's meeting about currency flexibility being preferable apparently spurred this new round of buzz surrounding perceived movements toward policy change by the central government.

But these perceptions aren't reality, underlined the central banks release, which reiterated China's argument that the country's current foreign exchange rate system is consistent with its economic development level, its capability in financial regulation, and the ability of Chinese enterprises in dealing with exchange rate fluctuations.

"It is exactly under this exchange rate system that the Renminbi maintained its stability and fended off the impact from the Asian financial crisis, which helped keep the Chinese economy on the course of continuous, rapid, and healthy growth," the statement added.

The government will, however, work to improve the Renminbi's exchange rate mechanism. But the precondition for doing this is the currency's stability, the statement explained.

It also said the process of making the yuan fully convertible and the development of the foreign exchange market will proceed in a steady manner.

Authorities will also loosen restrictions on enterprises and private individuals purchasing foreign currency.

"We will maintain the exchange rate basically stable at a level of reasonable equilibrium and promote the balance of international payments," the statement said.

The Renminbi was one of the key topics at last week's annual working conference of the central bank and the State Administration of Foreign exchange (SAFE).

(China Daily February 19, 2004)