Renminbi real effective value increased by 30%: official

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Last updated at: (Beijing Time) Friday, September 26, 2003

Renminbi real effective value increased by 30%: official

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"From 1994 to 1997 the Renminbi real effective value witnessed an increase of about 30 percent," noted Zhou Xiaochuan, President of China's Central Bank at the "Sixth Lecture for Distinguished Personages" sponsored by Hong Kong Monetary Authority (HKMA).

According to Zhou Xiaochuan, the Renminbi nominal exchange rate remained basically unchanged for certain periods. However, due to the inflation gap between China and other countries, the real effective exchange rate is on the changing, as shown by an approximate increase of 30 percent of its real effective value during 1994 to 1997.

Zhou Xiaochuan held that part of the pressure on the Renminbi revaluation came from the trade surplus. But we've noticed that China's trade surplus has decreased by a big margin this year. Another notion held that the pressure on the Renminbi revaluation was entailed from the rapid increase in foreign exchange reserve. With regard to this, Zhou Xiaochuan reckoned that, "Several points need to be taken into consideration. First, the Chinese per-capita foreign exchange reserve remains very low, a level between that of Indonesia and Thailand. Second, the proportion of foreign exchange reserve in China's GDP is quite close to those of the above-mentioned countries. Third, compared with the gross import and export volume, China's foreign exchange reserve boasts satisfactory. And lastly, the ratio of foreign exchange reserve to China's external debt is also passable."

As to the reform of the exchange system, Zhou Xiaochuan added that, "China's exchange rate is reasonable at present. It performs soundly and also conforms to the current whole economic reform. Therefore, we have no reason at all to alter the existing exchange rate policy and system all of a sudden." Zhou Xiaochuan believed that the system reform of the Renminbi exchange rate is an evolutionary process and is related to the path chosen for an integrated reform. And it is quite difficult to find out the best way towards China's system reform of the Renminbi exchange rate. What we can do is only to weigh the advantages and disadvantages before we finally come to make the decision.

By PD Online staff Zhu Lizhen

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