MARKET speculation that Zhu Xiaohua will step down as director of China's State Administration of Exchange Control (SAEC) because he has been blamed for policies that fuelled inflation last year have, to date, failed to materialise. Lu Nanping, director of the policy and regulation department at SAEC, said he had received no notice of Mr Zhu's replacement. 'Mr Zhu is still working in the office,' he said. 'He is still the director of SAEC.' It has been reported that Mr Zhu will be replaced by the vice-director, Wu Xiaoling, who is also the director of the policy research office of the People's Bank of China (PBOC), but this has not been confirmed. There is speculation in Shanghai that Mr Zhu has been relieved of his responsibilities in SAEC and is now engaged in helping to establish the City Corporative Bank. Mr Zhu, who is also the vice-governor of the PBOC, is expected to retain his post at the central bank after he leaves SAEC. The upsurge in foreign exchange reserves from US$21 billion at the start of last year to $58 billion at the end of March has led to a rise in the yuan exchange rate. The rate of the yuan against the US dollar has risen from 8.7 in April last year to 8.33 this month. To keep the yuan stable, the central bank has been forced to increase money supply to absorb the US dollar in the market, but the move has also been blamed for soaring inflation, which stood above 20 per cent last year. Money supply for the first quarter of this year amounted to 727.1 billion yuan (about HK$671.84 billion), a growth of 24.4 per cent over the same period of last year.