Minister: Yuan rate fluctuation cannot reveal foreign trade policy orientation

The fluctuation of the exchange rate of the yuan cannot reveal the orientation of China's policies on foreign trade and investment sectors, Chinese Vice Minister of Commerce Chen Jian said Monday at a press conference.

He noted that a stronger yuan will have positive effects upon Chinese companies operating in foreign countries despite its negative impact on exporters.

China restarted the reform of the yuan exchange rate formation regime in June after it re-pegged its currency to the dollar as the financial crisis intensified in July 2008.

Chen reiterated that the reform of yuan rate mechanism is a "gradual and controllable" process, and that it was formulated after the Chinese government balanced the country's economic development and yuan's supply and demand relationship caused by global economic situation.

Since the reform of yuan exchange rate regime started in 2005, the yuan has climbed 24.1 percent against the U.S. dollar, with increased flexibility.

"The flexibility of yuan exchange rate mechanism has increased. The currency has endured the change of various economic factors and has a stronger bearing capacity," Chen said, adding that these were the purposes of the reform.

He also vowed to minimize the negative impact of a stronger yuan, while maximizing the positive effects on boosting Chinese firms' outbound investment.

"For example, yuan appreciation affected the exports of some certain products, and we will accelerate the structural adjustment," he explained.

The appreciation of yuan also casts a shadow on Chinese companies' overseas contract construction projects, which are settled in dollars.

"The Global economic situation and global market environment also have a great impact on overseas contracting," said Chen Lin, an official with the Ministry of Commerce.

Vice Minister Chen Jian added that the decline of overseas construction contracting value was a normal change among long-term fast development.

"The general development momentum is good," he said.

By People's Daily Online