China's top banker says current fixed forex regime not permanent

Asian Economic News, Oct 4, 2004

BEIJING, Oct. 3 Kyodo

China's top banker has indicated Beijing is prepared to forge a foreign exchange system that better reflects market forces, saying the current fixed regime is not permanent, according to official Chinese news media.

People's Bank of China Governor Zhou Xiaochuan made the remarks in an interview with Xinhua News Agency in Washington on Saturday on the sidelines of a series of international financial meetings.

According to the report, Zhou defended the current dollar-pegged foreign exchange system, saying it was formulated at the request of neighboring countries under special circumstances at the time of a financial crisis in Asia.

China has kept the yuan pegged in a tight range around 8.28 to the dollar since 1994.

China's top banker said Beijing will push ahead with reforms toward crafting a flexible foreign exchange mechanism that reflects changes in the markets, but did not give a time frame for the goal, Xinhua reported.

Zhou also reiterated China will push forward reforms while taking into account various factors, including economic situations in China and surrounding countries, China's social development and international balance of payments.

The report came after financial ministers and central bankers from the Group of Seven economies reiterated their calls on China to relax its currency regime at their one-day meeting in Washington on Friday.