The Chinese government will not likely allow its currency, the
yuan or Renminbi (RMB), to appreciate by a fairly big margin, and
instead, is seeking to alleviate mounting pressure from
overseas.
Since a major reason demanding the revaluation of the yuan is
that China's foreign exchange reserves grew too fast to as much as
US$346.5 billion at the end of June, one of the ways the Chinese
government chose to help easing the pressure in this regard is to
satisfy the demand for more foreign currency from domestic
enterprises and individuals.
The State Administration of Foreign Exchange (SAFE) announced on
Monday that beginning Oct. 1, each Chinese resident may purchase
foreign exchange worth US$3,000 for each trip abroad, much higher
than the current limit of US$2,000. The amount for those who will
stay abroad for half a year or longer will extend to US$5,000.
Earlier, China allowed enterprises engaged in international
contractual projects, international contractual labor service and
overseas shipping to retain all foreign exchange (forex) income on
their own bank accounts.
"We will continue to take a series of positive measures to
loosen appropriately control on enterprises keeping their foreign
currency, enlarge the sphere of forex supply and address earnestly
the demand for rational use of foreign currency from enterprises
and individuals," a senior SAFE official told Xinhua.
Zhou Xiaochuan, governor of the ,
or the central bank, disclosed Wednesday that the Chinese
government supported all categories of enterprises in investing and
doing business overseas, and foreign-funded firms are allowed to
collect money directly from China's capital market.
International financial institutions were permitted to issue
bonds in China, he said.
And China's immigrants and non-Chinese citizens were allowed to
change their assets in China into foreign currency and then send
them overseas, Zhou added.
The QDII regime, which opened a channel for domestic investors
to enter the Hong Kong stock market, should be pushed forward at
the earliest possible date, said Prof. Yi Xianrong, a prestigious
financial expert with the Chinese Academy of Social Sciences
(CASS).
But a number of experts proposed to rather wait, until
systematic drawbacks and other problems in China's two stock
bourses, in Shanghai and Shenzhen, were addressed properly and
market conditions matured.
Increased imports and the maintenance of the balance of
international revenue and expenditure were also being taken into
account by relevant state departments, and the SAFE has vowed to
encourage imports appropriately to spur industrial upgrading and
economic restructuring, which will cost China more foreign exchange
reserves.
China's entry into the World Trade
Organization (WTO) has brought large amounts of foreign goods
into the country and lowered the country's trade surplus.
Noted economists foresee that China's trade surplus will stand
at five to ten billion US dollars this year, far below the US$30
billion for 2002.
China's exports, basically being labor-intensive goods, account
for just five percent of the world's total. They could not cause
deflation or worse economic impacts on Japan and the United States,
experts acknowledged.
These countries have long blamed China for keeping the RMB
exchange rate at a low level to maintain its trade surplus.
China is now implementing a regulated and floating exchange rate
regime based on market demand and supply, making the RMB yuan
basically stable.
Zhou Xiaochuan, governor of the central bank, said China would
continue to move toward the goal of making gradually the yuan a
convertible currency, but the process would "take a fairly long
period of time".
(Xinhua News Agency September 4, 2003)