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Foreign Ministry Spokesman Kong Quan's Remarks on Premier Wen Jiabao's Meeting with CEO of the Citigroup
2004-09-30

Q: According to the Chinese media, Premier Wen Jiabao met with Citigroup's CEO and his delegation. What questions did the two sides discuss? Did they touch upon the RMB exchange rate mechanism and the next steps of reform?

A: On September 28, Premier Wen Jiabao met with the CEO of Citigroup Charles O. Prince and former US Secretary of Treasury Robert Robin, who are visiting China at the invitation of the Chinese People's Association for Friendship with Foreign Countries. Premier Wen answered their questions on the current China-US relations, trade and economic cooperation between the two countries, China's economic development, the RMB exchange rate mechanism and further reforms.

On the question of the RMB exchange rate mechanism, Premier Wen Jiabao emphasized that China has adopted a market-determined managed floating exchange rate. Since the unification and reform of the RMB exchange rate in 1994, the RMB has experienced both appreciation and depreciation against major international currencies. In the four years between then and 1997, the range of RMB fluctuations was quite wide. After 1998, to cope with the Asian financial crisis, the Chinese Government committed itself in a responsible manner to keeping the RMB from devaluation and narrowing the band of the floating exchange rate. Such moves contributed to economic and financial stability and development in Asia and the world at large. Regarding the next steps of reform, Premier Wen said that the direction and objective of reform is to improve the exchange rate mechanism and maintain a basically stable exchange rate on a rational and balanced basis. In recent years, we have adopted a series of reform measures to improve the exchange rate mechanism, such as accelerating the reform of the state-owned commercial banks, realizing convertibility of the RMB under the current account, gradually easing restrictions on the capital account, steadily opening the equity market, attracting an increasing number of QFII and FDI to China, relaxing restrictions on the access to Chinese financial market and limits on business scope, and continuously increasing financial products and lines of business. The Chinese Government will further promote the reform, so as to establish a RMB exchange rate mechanism that is more flexible and reflective of supply/demand changes in the market. Premier Wen stressed that reforming the exchange rate mechanism is a systematic project involving many aspects and requiring overall consideration of China's macro-economic situation, social development and balance of international payments. Consideration also has to be given to the banking reform and other reforms as well as the economic and financial situations in neighboring countries and regions and even in the world. The Chinese Government will take multi-faceted measures to push forward the reform in a gradual and prudent way.

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