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China's exchange rate reform successful on the whole |
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10:30, July 25, 2007 |
On July 21, 2005, the People's Bank of China, or the central bank, announced the nation's start of a market-based, regulated floating exchange rate regime pegged to a basket of currencies. For two years since then, bearing sophisticated economic and financial pressure from both at home and abroad and sticking to the principle for an active, controllable and gradual way of reform, China has been pushing forward the reform in measured strokes. The reform is largely successful, experts say.
Reform didn't affect economic growth
The RMB exchange rate reform didn't affect China's economic growth rate, and the nation's economic prosperity has been continuously prolonged. The Yuan's external role has not been weakened but increasingly accepted by neighboring regions.
Chinese enterprises are mainly engaged in processing trade that is not so sensitive to exchange rate, experts say, and some sectors are highly competitive and capable of reshuffle, therefore the reform didn't have a visible impact on the economy. On the other hand, the impact was also cushioned by the government who went step by step and spelt out related policies only after full tests on enterprises' adaptability.
Zhu Mengnan, dean of the Finance Department of Xiamen University, said: "The exchange rate reform is successful on the whole, and the revaluation degree is acceptable to our economy and external environment." He predicts that the rate, after fast revaluations, will become stable.
Market playing an increasing role
By July 19 this year, the RMB exchange rate stood at 7.5636 against one U.S. dollar, rising more than 7.22 percent over the 8.11 when the reform was launched two years ago.
Within the two years, some worthy events should be recorded: on August 15, 2005, the China Foreign Exchange Trading System officially introduced the inter-bank foreign exchange forward trading products; on September 23, 2005, the central bank widened the trading range for the yen and euro to 3 percent from 1.5 percent; on January 4, 2006, the central bank announced China's introduction of the over-the-counter (OTC) transactions in the inter-bank foreign exchange market and the market maker system; on May 21, 2007, the yuan was allowed to move as much as 0.5 percent on either side of the daily rate it sets against the dollar, up from the previous 0.3 percent.
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