Stronger yuan not major inflation control means
Updated: 2008-03-06 14:48
A faster appreciation of the Chinese yuan may help control inflation, but cannot become the major means of curbing inflation, said the central bank governor.
Inflation control still rely mainly on the government's polices, including tight monetary policies, said Zhou Xiaochuan, governor of the People's Bank of China (PBOC), at a press conference held during the annual session of China's top legislature, the National People's Congress (NPC).
China has made its currency regime more flexible by letting the yuan appreciate steadily. The currency has appreciated about 12 percent since July 2005, when the government started to de-peg the yuan from the greenback.
On Thursday, the yuan rose 4 basis points to hit a central parity rate of 7.1168 yuan per US dollar.
A faster appreciation of the yuan has been suggested by some economists to help cut the trade surplus, which is believed to be the chief reason of the current excessive liquidity that drives up prices. A stronger yuan would make exports more expensive in foreign currency terms.
"It's helpful," said Zhou, denying that inflation is the major consideration in accelerating the yuan appreciation.
The exchange rate was decided more by market forces, or the suppliers and demanders' predictions of the trend of a currency's value, Zhou explained.
He pointed out that inflation control relied mainly on the government's policies, including tight monetary policies.
Premier Wen Jiabao has mentioned nine measures in his government work report, which was delivered at the NPC's annual full session's opening meeting on Wednesday, to ensure effective supply and curb excessive demand as ways of stabilizing prices, he said.
Last year, the central bank raised the reserve ratio 10 times and interest rates six times to soak up liquidity. The reserve ratio has so far been raised once in 2008. Economists expect further interest rate hikes this year.
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