Pledge to further reform managed exchange system
State Council stresses continuation of stability for yuan rate
Beijing has said it will further reform its managed exchange system to keep the yuan at a stable level and maintain a balance in international payments this year.
In a notice posted on the central government's website yesterday, the State Council said it would maintain a prudent fiscal and monetary policy to ensure the economy grew at a stable and relatively rapid pace.
'[We should] perfect the managed floating exchange system to maintain the basic stability of the yuan's exchange rate, keep it at a reasonable and balanced level, and encourage a balance in international payments,' the statement said.
The 58-point notice was designed to instruct central ministries and regional governments on the priorities for government work this year.
Apparently echoing the cabinet's call, the central bank also issued a statement yesterday calling for a continuation of the basic stability of the yuan exchange rate and a prudent monetary policy.
'We will perfect the mechanism for determining the yuan exchange rate, expand the foreign exchange market and increase the flexibility of the yuan exchange rate float,' the People's Bank of China announced on its website.
Beijing's pledges to promote equilibrium in the balance of payments come at a time when three United States senators, including Charles Schumer and Lindsey Graham, are in Beijing to discuss the currency situation and determine whether to press ahead with anti-China trade legislation.
The mainland's main trade partners, the US in particular, have accused Beijing of keeping its currency artificially low to gain trade advantages and building up huge trade imbalances. A US bill, proposed by senators Schumer and Graham, would impose a 27.5 per cent tariff on Chinese imports.
The State Council called for 'appropriate expansion of credit and optimising its structure' in the economy. The notice advised government departments to cut budget deficits and called for a diversion of government revenue towards helping smaller enterprises, supporting rural education and infrastructure and other projects benefiting farmers.
The government will also try to boost consumption and keep consumer prices stable this year.
At the same time, it promised to push forward reforms in the financial sector and crack down on economic crimes, the statement said, without elaborating. This is likely to cover further reform of top banks, policy banks and rural credit co-operatives.
The State Council said state regulators must strengthen the supervision of financial markets to create 'an open, just, fair and transparent market environment and prevent risks'.
The central government also pledged to complete the reform of non-tradeable shares by the end of this year and urge listed companies to improve corporate governance and encourage innovation in the stock market.
