China plans gradual forex reform, says central bank

BEIJING - China will reform its exchange rate regime gradually on a schedule of its choosing and does not plan simply to revalue the yuan, the central bank governor said.

The remarks were the latest signal from Beijing that it will not rush to overhaul its fixed-currency system, which the United States and other complain makes Chinese exports unfairly cheap.

"We will carry out reforms of the renminbi exchange rate formation mechanism in an active, steady, planned and step-by-step manner," Zhou Xiaochuan, governor of the People's Bank of China, was quoted as saying.

Reforms to the yuan , also called the renminbi, would be unveiled at an "appropriate time", Zhou added in an interview on the website of the People's Daily, the official mouthpiece of the ruling Communist Party.

Zhou also said China had to consider the regional and global effects of the planned reforms, which would not be aimed merely at adjusting the exchange rate, currently set in a tight range near 8.28 to the dollar.

Rather, the chief aim would be perfecting the system, Zhou said.

"In looking at our current international balance of payments, the task for the future is mainly to perfect the renminbi's exchange rate formation mechanism, not merely to adjust the exchange rate," Zhou said.

That is in line with the views of most economists, who see China gradually widening the yuan's trading band and possibly dropping the dollar peg in favour of a currency basket.

Zhou also said the central bank would keep a close eye on the overall economy, consumer price inflation and other indicators to determine whether to raise interest rates.

China increased lending rates last October for the first time in nine years. The one-year rate rose 0.27 percentage point to 5.58 per cent.

- REUTERS