Home > China News
China to keep rational exchange rates, continue financial reforms: Premier
2004-02-11 00:00

Chinese PremierWen Jiabao said Tuesday China would continue to maintain the stability of its currency at a rational and balanced value, while speeding up financial reform, stepping up financial supervision and regulating financial order to improve competitiveness in its financial sector.

Addressing a national meeting on banking, securities and insurance, the premier said China would push forward market-oriented reform of its interest rates in a stable way, and gradually improve the exchange rate formulation mechanism for its currency to keep the exchange rates at a rational and balanced level.

While reviewing the country's economic performance last year, Wen said some problems cropped up while the country's economic growth accelerated last year, such as excessive investment and hidden financial risks facing the country's financial sector.

Excessive investment in some sectors, including the iron and steel and cement industries, and in some regions had led to duplication of low-technology manufacturing projects, he said. The excessive investment was blamed for short supplies of energy and raw materials, and a strain on the transportation sector.

Wen said that while the country's financial situation was good on the whole with important progress in reform and opening of the country's financial sector last year, the volume of credit loans grew too fast and the structure of credit loans was out of balance.

He said one key priority for the financial sector this year should be to deepen the reforms at State commercial banks. The core part of the reforms will be joint-stock restructuring of the Bank of China and the China Construction Bank, he said.

Wen said the problem of launching unreasonable and poor copy-cat projects, which ignited runaway inflation in the early 1990s, is now serious in some industries and regions. At the same time, credit grew at a faster-than-needed rate last year, which poses risks to the health of the nation's financial system, he said.

China's fixed assets investments totalled 5.5 trillion yuan (US$662 billion) in 2003, which represented a whopping 26 per cent annual growth. The rate compared to 16 per cent in 2002.

Economic officials said the investments were responsible for 46 percent of last year's economic growth, which stood at an impressive 9.1 percent despite the impact of SARS (severe acute respiratory syndrome). But many of these investments were excessive and unhealthy.

At a conference earlier this month, Vice-Premier Zeng Peiyan singled out sectors such as steel, aluminum and cement as industries showing signs of overcapacity.

These sectors have experienced powerful growth last year due to increasing demand from manufacturers and real estate developers. But the demand also lured companies to expand their capacity without considering the limits of demand.

At Tuesday's meeting, the Premier said the government would make better use of monetary and credit policies to regulate the overall amount of loans, optimize its structure, and curb credit loans to the sectors troubled by excessive investment.

He outlined the strategy the central government takes to improve competitiveness in the country's financial sector, saying China would quicken financial reforms to set up a modern financial corporate system in the following aspects:

-- deepening the reform of state-owned banks, giving priority to the joint-stock reform of the Bank of China and the China Construction Bank on a pilot basis;

-- continuing the reform of the country's rural credit unions to improve the rural financial system by stages;

-- continuing to improve financial assets management companies for faster and effective disposal of bad assets;

-- pushing forward reform and opening and stability of the capital market;

-- deepening the restructuring of the insurance sector to expand the insurance market, and

-- honoring its World Trade Organization commitments to expand the opening of its banking, securities and insurance sectors to overseas investment.

Wen said it was essential for China to improve laws and regulations concerning the financial sector, consolidate supervision of the sector and rectify financial order and step up construction of the country's credit system to maintain the financial system.

He called for better law enforcement to reduce financial risks and to crack down on financial crimes, faster construction of the country's unified corporate and personal credit information infrastructure and improved regulation of the operation and management of credit gathering institutions.

Suggest to a Friend
  Print