Reform of RMB exchange rate system is matter of China's sovereignty and any pressure and speculative exploitation of the issue or any attempt to turn the economic issue into a political one will not be conducive to resolving it, Chinese Premier Wen Jiabao said during his meeting with guests from the US Chamber of Commerce Monday.

Wen said as long as conditions are ripe, the Chinese government "will take the initiative to advance the reform of the exchange rate system without any pressure from outside the country."

"If conditions are not available, the Chinese government will never hastily take any action, regardless of how great the pressure from outside is," Wen said.

Local analysts said the statement of the Chinese leader is a response to the United States' recent stepping up of pressure on China to change the exchange rate of RMB. They expressed the belief that Wen's remarks will smash the recently heated speculations about revaluation of the Chinese currency.

During his meeting with the American guests, Wen made clear the basic stance of his government on the reform of the exchange rate system of the Chinese currency. He emphasized China has to proceed from its specific condition when advancing the reform of the RMB exchange rate. He said it is essential to take into consideration such factors as the macro-economic environment, the ability of Chinese companies to withstand the impact of changes in exchange rates, the progress of financial sector reform and the impact on international trade.

In the mean time, Wen underscored that reform of the RMB exchange rate system has to take into consideration its impact on neighboring countries, regions and global finance and economy.

As a big country, China has to proceed from the practical needs within the country while changing its exchange rates, said Li Yang, director of the Finance Institute under the Chinese Academy of Social Sciences.

Li said China must not repeat the lesson of Japan, noting that Japan increased the value of the Yen under pressure from the United States and incurred serious negative impact on its economy in the 1980s.

The US Senate passed a bill in April to demand that China let the RMB appreciate in six months. Otherwise, the U.S. will probably impose punitive tariffs on imported goods from China, according to the bill.

Since then, speculations have spread that pressure from the United States will compel China to revalue its currency soon. The rumors ran increasingly rampant over the past few weeks. Some time earlier, a trifle move in the foreign exchange market of China led to predictions that RMB would appreciate around May 1. After the rumors proved to be fake, more speculations arose, saying that China will increase the value of its currency as it launches inter- bank foreign exchange purchase business on the coming Wednesday.

However, Governor of China's central bank Zhou Xiaochuan clearly cited this new rumor as groundless last Friday.

Li Yang attributed the stronger US pressure on the RMB issue to the presumption by some Americans that a revaluation of the Chinese currency will help scale back the gaping trade deficit of the United States.

The growing US trade and budget deficits are the outcome of the structural problems in the US economy, Li said. The United States should look inside rather than outside to seek resolutions to the problems so as to restore balance to its current accounts.

Since the US trade deficit with China has become an issue of common concern between the two nations, the two sides are showing a readiness to step up dialogue and consultation on the issue. In March, Chinese State Councilor Wu Yi told US Secretary of State Condoleezza Rice that China is ready to join efforts with the United States to expand US hi-tech exports to China so as to realize balance of trade between the two countries.

Source: Xinhua