Zhou Xiaochuan: RMB Exchange Rate Reform Must Be Gradual

Zhou Xiaochuan, governor of the people's Bank of China, said on Friday that the reform of the RMB exchange rate must be gradual and the pace of reform depends on the balance of payments in China.

"China's exchange rate policy is gradually moving to a balance point based on the supply and demand of the market," Zhou Xiaochuan said at a seminar held by Broadcasting British Corporation today at the IMF annual meeting. "We are carrying out monetary reform in a step-by-step way instead of adopting the so-called shock therapy."

Since June, the exchange rate of RMB against the US dollar has increased by 2%. Foreign governments believe that China's exchange rate is too slow to accuse China of artificially low ground pressure.

Zhou Xiaochuan reiterated that China will push its currency reform according to its own pace.

He added that the speed of RMB appreciation depends on the balance of payments.

"For large economies, gradualism is beneficial," Zhou said. "Otherwise, it will damage the economy."

He pointed out that China needs a market based one.

However, he did not predict the trend of the renminbi and China's economic growth.

Zhou Xiaochuan said that the positive fiscal measures launched in 2008 and relatively loose monetary policy have caused inflation risks and asset bubbles.

After measuring the trend of the economy, China will carefully consider the corresponding fiscal policy in the coming months.

However, he pointed out that because of the relatively low proportion of debt to GDP, China still has much more to implement positive fiscal policies to boost economic growth.