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RMB, Future International Currency
Dai Xianglong, governor of the People's Bank of China (PBOC), pointed out recently that China has shaken off the negative influence of the Asian financial crisis. Facing the challenges of financial globalization, the PBOC will stick to its steady monetary policy and continue to promote the interest-rate market reform, establish a modern commercial banking system, further improve the floating interest-rate system and expand opening the financial sector.
Dai said that China is going to enter the WTO. After several years of transition, China will grant national treatment to foreign enterprises and foreign-funded financial institutions. The opening of China's financial sector will also enter a new stage.
Meanwhile, by the end of last year, China's foreign currency reserve had exceeded US$150 billion, ranking second behind Japan in the world. China's current foreign currency reserves have surpassed the gross amount of foreign currency used to pay for annual imports. The value of the RMB remained stable. The exchange rate of US$ Vs RMB at the end of last year was 1: 8.2793. All these factors provide a powerful backing for the stable RMB exchange rate.
The fact that the Chinese government has kept its promise of not devaluing the RMB has not only demonstrated China's important role in maintaining the international economic order and financial stability, but has also strengthened people's confidence in China's economic development.
After 20 years of reform and development, various Chinese financial institutions have undergone an all-round development. Presently, China has basically set up a financial organizational system which is healthy and complementary in function and an open and competitive financial market and initially established an efficient financial supervision and controlling system; financial laws, a statutory frame system, and has thus brought the financial business onto the track of legalization and standardization; the opening of the financial sector to the outside world is making steady progress. As China's financial institutions advance toward the international market with great strides and participate in international competition, foreign financial institutions have also begun to enter China.
Since last year, China has further raised its rebate rate of export taxes. The volume of export trade has increased gradually and a trade surplus has thus been maintained. According to expert analyses, after China's joining the WTO, a large amount of foreign investment will stream into China. The two factors mentioned above indicate that China's entry into the WTO will not result in a dramatic depreciation of the RMB.
An economics professor with the Massachusetts Institute of Science and Engineering pointed out in his article published in Weekly Der Spiegel in 1999 that 20 years later, there will only be several kinds of currencies left in the world. China's currency will likely occupy a leading position in Asia. The US dollar will be in common use in Latin America and North America. Euro will take a dominant position in the remaining regions. Chinese governmental officials hold that there is great uncertainty whether or not the RMB can achieve this goal. But this view of a Westerner indicates his optimistic anticipation of China's finance and economy.
Dai also indicated that it is the Chinese government's objective to make the RMB a convertible currency. There has not as yet been a concrete timetable. Currently, the self-restraint ability of some Chinese enterprises is weak and the capacity of the securities market is limited. Allowing the existence of this situation is aimed at preventing risks and safeguarding the investors' benefits. The Chinese government is improving macro-conditions, enhancing its ability for the balance of international payment, and perfecting the financial system, thereby creating conditions for the opening of capital items.
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