China will maintain the stability of its yuan currency, also known as the renminbi (RMB), after the country joins the World Trade Organisation (WTO), central bank governor Dai Xianglong was quoted on Wednesday as saying.
"We will continue to expand the financial sector opening, maintain a sound balance of payments and maintain the renminbi's stability," Dai was quoted by the official Economic Information Daily as saying.
"After the WTO entry, there will be bigger changes in the balance of payments and the exchange rate will have certain flexibility ... but we will continue to implement and improve the existing exchange rate system," he said.
China is expected to join the world trade body by early next year, at the latest.
China practices a "managed float" for the yuan, but from mid-1997 to April 2000, it contained the yuan between 8.2770 and 8.2800 to the dollar to fend off speculation of a devaluation.
It has relaxed its grip over the past 14 months and allowed the yuan to end outside the long-standing range 76 times, although only twice outside the weak end.
The yuan is convertible only on the current account, therefore China's trade surplus -- US$8.14 billion in the first half of this year -- has largely supported the yuan so far this year.
Chinese officials say a more flexible foreign exchange regime will be needed to cope with expected external shocks after China becomes a WTO member. But they have given no timetable or specifics on the wider trade band.
Dai said the central bank would strive to maintain annual money supply growth of 14-15 percent between 2001 and 2005 to help stimulate the economy, which was expected to grow 7-8 percent annually.
Pressure on exports mounting
Separately, the International Business Daily quoted Lu Yan, an analyst at the Ministry of Foreign Trade and Economic Cooperation (MOFTEC) as forecasting China's export growth could slow to five percent this year.
"The negative growth in June was a signal showing that pressures on exports in the second half are still mounting," Lu was quoted as saying. "Exports are expected to grow five percent this year."
Exports fell 0.6 percent year-on-year in June -- the first decline in two years. In the first half, exports rose 8.8 percent year on year, well off from last year's blistering 27.8 percent.
Chinese trade officials have forecast exports would grow around eight percent this year despite weakening global demand.
However, buoying domestic demand would power the economy to 7.5 percent growth this year despite slowing export growth, predicted vice central bank governor Liu Tinghuan.
"Exports are expected to slow further in the second half, but the whole-year economic growth could reach 7.5 percent in 2001," Liu was quoted by the Financial News as saying.
The economy grew a year-on-year 7.9 percent in the first half of this year, driven by soaring state investment in infrastructure and reviving consumer spending.
(Agencies 07/26/2001)
