Economy

China to proceed with RMB reform, keep stimulus

(Xinhua)
Updated: 2010-05-22 10:52

BRUSSELS - China will continue to proceed with the reform of its currency yuan, or RMB, and keep its fiscal stimulus in place for now, Chinese Minister of Commerce Chen Deming said on Friday.

China's Commerce Minister Chen Deming (L) and European Union Commissioner for Trade Karel De Gucht hold a joint news conference after their meeting at the EU Commission headquarters in Brussels May 21, 2010. [Agencies]

"We know now the euro is in difficulty. We will continue with the direction of the reform of our currency," Chen told reporters after a meeting with European Union (EU) Trade Commissioner Karel De Gucht here.

"China will continue to proceed towards the direction of reforming the exchange rate formation mechanism of RMB. This will remain unchanged," he added.

According to Chen, the RMB has appreciated by 15 percent against the euro in recent months and by 7 percent in the past month as the euro dropped dramatically with the Greek debt crisis spreading in the eurozone, which posed risks to the economic recovery.

Chen said it is important to keep major currencies, including RMB, stable as the economic crisis is not yet over.

"The stability of a country's currency, especially the currency of major economies, is of vital importance. The depreciation or appreciation of a single currency will have a major impact on the world economy," he said.

Related readings:  RMB appreciation 'more likely' in Q2  Demand for RMB dwarfing supply  China should decide RMB's future: economist  Snow: Let China decide on RMB  RMB appreciation not recipe for US trade deficit  US insistence on RMB revaluation a 'mistake': Forbes

A spokesman from the Chinese Ministry of Commerce said earlier this week that the worsening debt crisis in the eurozone and the sharp depreciation of the euro would have negative impact on Chinese exporters.

The EU is currently the largest market for China, accounting for 16 percent of Chinese exports.

Chen said the Chinese government was closely following the eurozone debt crisis and would like to see a stable and strong euro. He said China believes the crisis would be overcome soon by a joint rescue effort by the EU and the International Monetary Fund (IMF).

"The Chinese side is following carefully the development of the sovereign debt crisis in the European Union and hopes, and also believes that the efforts made by the EU and the IMF will end the crisis as soon as possible," he said.

"China also looks forward to a stable and strong euro," he added.

Eurozone countries and the IMF agreed early this month to jointly provide 110 billion euros ($137 billion) in three years to aid debt-laden Greece. Only one week later, a larger rescue package worth 750 billion euros ($937 billion) was hammered out in order to prevent the Greek debt crisis from spreading in the eurozone.

Chen said China will do its part in the largest-ever rescue efforts.

"China is a member of the IMF and therefore it will assume its due responsibilities when it comes to the rescue package," he said.

Chen said the eurozone debt crisis again highlighted fragility of the global economic recovery and against this background, it remains too early for China to phase out fiscal stimulus measures.

"There are still a lot of uncertainties in the world economy. Therefore we believe it is too early for us to talk about an exit strategy from our stimulus package," he said. "The Chinese government will continue to implement a proactive fiscal policy and a moderately easy monetary policy."

Chen also called on world governments to remain alert to trade protectionism for the sake of a global recovery.

"There is still uncertainties and tough way ahead. As the world is going through an economic recovery, countries across the world need to make concerted efforts to stand against protectionism and support liberalization of trade and investment," he said.

As for China, Chen said Beijing will continue the policy of stabilizing its own exports and promoting imports, which he hoped would help eurozone countries emerge from the debt crisis.