A spokesman for the People's Bank of China (POC) said Friday that the central bank welcomes the efforts made by the International Monetary Fund (IMF) in its staff report for 2004 Article IV consultation with the People's Republic of China.

The IMF published the report on November 5, the first time since China resumed its legal status in the organization in 1980. According to the Article IV of the IMF convention, the IMF consults with all member governments regularly to know about their macro-economic operation and monitor their economic policies.

The spokesman said that the Chinese government has held annual consultations with the IMF since 1980, involving finance and taxation, monetary industry, foreign-oriented departments and real estate. The report, written by IMF staff following the consultation, reflects the judgment and views of IMF staff on the economic and financial situation in relevant countries.

"The IMF has been making efforts to promote transparency in their work over the years, and the publishing of consultation reports is a part of this process. We welcome the efforts made by the IMF," he said, adding that the report can help readers make their own independent judgment.

He said that the report makes a relatively comprehensive analysis of China's economic and financial situation, and provides suggestions on measures to be adopted by the Chinese government. Because statistics used in the report are from before June 2004, however, some analysis probably needs to be updated.

Talking about China's macro-economic and financial situation, he said that the Chinese government's efforts on macro-economic control have restrained some unstable factors in economic life, helping maintain a steady and fast development of the economy. The POC has also adopted various monetary policy tools to improve its macro-financial control level. The latest statistics show that China's economy is operating smoothly, monetary and credit policy measures have paid off, the financial sector operates in an anticipated healthy way.

He also said, however, that there are still many inconsistencies and problems in current economic life, prominent ones are that the foundation of agriculture is not stable, the volume of investment in fixed assets is still too big, and market price still faces fairly grim hiking pressure. As a result, macro-economic control measures should be maintained, more economic and legal measures should be adopted, and market mechanisms should be given full play in an effort to consolidate the achievements of macro-economic control.

As for China's exchange rate mechanism, he said that China will continue to improve the forming mechanism of the exchange rate of Renminbi, ensuring that the exchange rate is basically stable at a reasonable and balanced level, and international payments are basically balanced. While effectively preventing risks, China will relax restrictions on cross-border capital trading in a selective and step-by-step way, so as to gradually realize RMB convertibility under capital accounts.

He said that China will further promote reforms to produce an RMB exchange rate mechanism that is more flexible to changes in market demand and supply, but this is a complicated, systematic project, and many factors should be taken into consideration, such as China's macro-economic operation, social development and international payment conditions, banking system reforms and reforms in other relevant sectors, as well as bordering countries and regions and the world's economy and finance as a whole.

"We will adopt various measures to promote this reform gradually and safely," he said.
 
(Xinhua News Agency November 6, 2004)