China to Maintain Stability of RMB Yuan: Minister

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Last updated at: (Beijing Time) Friday, July 25, 2003

China to Maintain Stability of RMB Yuan: Minister

Chinese Minister of Commerce Lu Fuyuan said Thursday in Dalian that China will maintain the value of its currency in line with the fundamental interests of the Chinese people and China's national economy. The Minister also announced a shift in government policy, encouraging domestic companies to increase their imports from overseas.

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China will maintain the value of its currency in line with the fundamental interests of the Chinese people and China's national economy, Chinese Minister of Commerce Lu Fuyuan said Thursday at a press conference following the closing of the 5th Asia-Europe Meeting (ASEM) Economic Ministers' Meeting (EMM) in Dalian, a seaside city in northeast China's Liaoning Province.

"China's major task at present is to maintain stable economic growth. The current policy of maintaining the value of the currency does not rule out future adjustments or changes," he said.

He also stressed that currency policy adjustment should be based on the domestic situation of a nation. No country in the world makes currency adjustment decisions based on the international situation alone, without analyzing its domestic situation.

Many differences exist with the values of many different currencies such as the US dollar and euro. But they will make their own judgement according to their situation, he added.

Lu said China's position on the issue has been clearly stated by the People's Bank of China, the country's central bank. Governor Zhou Xiaochuan reaffirmed China's policy favouring a stable yuan in a speech posted on the central bank's website on July 14.

He said China will work at its own pace to introduce foreign-exchange reforms.

"China should continue to promote reforms to liberalize interest rates, maintain the fundamental stability of the yuan foreign-exchange rate, and continue to perfect the foreign-exchange rate system," he said.

"We noted there do exist some problems, but we believe they can be resolved in the process of economic development," Lu said.

China not worried by surging imports

The Chinese Minister indicated he is not at all worried about the 44 percent faster-than-exports growth in imports in the first half of this year, or a probable resulting trade deficit this year, which China has not seen for years since the 1997 Asian financial crisis.

Lu attributed the surge to the growing Chinese economy, noting that the severe acute respiratory syndrome (SARS) epidemic had had no major effect on the economy.

The rapidly-expanding economy needs to import large amounts of raw materials and parts, he said, adding that imports couldn't register such high growth without sound economic growth.

China has fulfilled its World Trade Organization (WTO) commitments and reduced tariffs markedly, he said. The high price of oil due to the Iraqi war also contributed to the increase in import volume, he said.

"We are not worried by the increase in imports," Lu said, as China's rich foreign currency reserves provide flexibility in terms of increasing exports, if necessary.

"China will import US$1 trillion in the next three years and become the world's second largest purchaser in 20 years, only after the United States,'' Lu said at the press conference marking the conclusion of the fifth Asia-Europe Economic Ministers' Meeting.

The Chinese Government encourages domestic companies to increase imports as well as expand exports because increased imports are expected to also fuel domestic economic growth and make a contribution to world economic growth, he said.

China to enhance cooperation with Asia and Europe

China hopes to promote mutual understanding and economic cooperation with members of the Asia-Europe Meeting (ASEM) through which it can also enhance cooperation with Asia and Europe.

Lu said that Japan is China's largest ASEM trade partner and the European Union is the third largest. The Association of Southeast Asian Nations (ASEAN) and the Republic of Korea (ROK) rank 5th and 6th, respectively.

"There are four ASEM members among China's top 10 trade partners," he said, adding that they are all crucial to China's overall economic growth and trade development.

China sees a bright future for economic cooperation with the four ASEM members, based on an already solid foundation, Lu said.

China is carefully evaluating the proposals made by the leaders of the 4 countries designed to boost bilateral trade and is conducting research to design a medium- and a long-term strategy, he said.

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