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PBOC: Economy too much export-driven
Updated: 2005-09-20 08:52

China's central bank pledged Monday to keep the newly unshackled yuan basically stable but urged fresh efforts to wean the economy off export-driven growth.

In a statement posted on its website after the 3rd-quarter meeting of the Monetary Policy Committee, the People's Bank of China (PBOC) said China‚Äôs fast-growing trade surplus was a problem for the overall economy.

"There should be concerted macro-policies to actively expand (domestic) consumer demand and speed up restructuring the economy and foreign trade to improve economic efficiency and achieve a sustainable economic growth and stable prices," the statement said.

The language reflects a hardening conviction in Beijing that China's growth model, powered by investment geared towards exports, leaves it vulnerable to a proliferation of trade barriers. The United States has imposed quotas on a range of Chinese textile exports, and Beijing has lately agreed to curbs on textile sales to the European Union following difficult negotiations.

China saw a trade surplus of US$60.2 billion in the first eight months this year, and economists expect the figure for the whole year to amount to $80 billion or even higher.

Foreign governments, the U.S. Congress especially, have said the yuan remains cheap despite a landmark 2.1 percent hike against the U.S. dollar on July 21, when the bank scrapped a 11-year-old dollar peg and adopted a managed float system.

The authorities have since allowed the yuan, also known as the renminbi, to rise on its foreign exchanges market. The yuan closed at 8.09 per dollar on Monday.

"We should continue perfecting the managed float exchange rate regime and keep the renminbi exchange rate basically stable at a reasonable and balanced level," the bank said. It said it would seek to maintain monetary policy "continuity and stability".

The statement said China's overall economic growth rate, which has been 9 percent or more in the past eight quarters, was easing a little but that fixed-asset investment in some sectors was still too strong.

The government has been using lending curbs and administrative orders for the past two years to rein in excessive investment in sectors such as autos, steel, cement and real estate.

At the same time it has been spending freely to overcome bottlenecks in the economy. Even so, the central bank said supplies of coal, oil and power were still quite tight.

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