1970-01-01 08:33:28
China should push ahead with reforms in setting market-based interest rate and exchange rate, Cheng Siwei, former vice-chairman of the standing committee of the National People's Congress, said Tuesday.
China took a step further in allowing the exchange rate to reflect market in July 2005 when it scrapped the yuan-U.S. dollar peg and let the rate be set in reference to a basket of currencies, Cheng addressed a finance forum hosted by leading web portal Sina.com in Beijing.
The yuan has gained almost 20 percent against the basket of currencies over the past more than three years, according to him.
"The exchange rate should float in a managed target range," said the renowned economist." If it floated in the target range, there shouldn't be excessive intervention. But if exceeded the range, the central bank should take proper measures."
"It's just a matter of time for the yuan to become fully convertible. Although there is no timetable, but I think the day wouldn't be far away," he added.
The deposit and lending rates should be adjusted to reflect market and be allowed some room for floating according to different risks and transaction costs, Cheng noted.
This is key to help get easier credit for farmers and small and medium-sized enterprises, he stated.
More private and foreign capital should be encouraged to make investments in the local financial institutions, Cheng said.
"Should there be more market players, we can better improve our financial system," he said, although admitting there sometimes should be ceiling on the investment for national security concerns.
Cheng called to establish a multi-layered financial market. "The securities market has already had a certain scale, but the bond market is far from developed."
"The bond market, forex market and futures market should be developed, and so should be the financial futures and stock index futures," he said.
"Of course, we need to be very careful to guard against excessive speculation and potential risks in the development stages."
Source:Xinhua