China Sees Yuan Appreciating

China is to take measures to maintain the stability of its currency, yuan, which, rather than facing possible devaluation, is under pressure to appreciate, a senior securities regulatory official said on Wednesday.

The measures would be discussed at China's annual session of parliament that begins on March 5, said Chen Yaoxian, executive

vice chairman of the China Securities Regulatory Commission, Beijing's top securities watchdog.

Until November, Chen was one of the five deputy governors at the central bank, the People's Bank of China.

Currently, I am not in a position to give more information because you have to wait until March for the (National) People's Congress, Chen said.

More solid and effective measures will be taken to maintain the stability of high economic growth, the stability of the currency and also the stability of the exchange rate, he added.

The main policy in 1998 is to maintain the general overall balance between supply and demand to ensure economic growth, and implement a financial and monetary policy that is a little tight, he said.

China has long said it wants to maintain what it calls an appropriately tight monetary policy as part of a lengthy drive to curb once-rampant inflation.

Addressing the conference attended by market regulators from the Asia-Pacific region, Chen said the measures to be introduced in March were likely to create pressure on the yuan to appreciate.

A lot of people have been talking about the possible devaluation of the renminbi (yuan). I personally think the renminbi will witness pressure for appreciation rather than devaluation, Chen said.

Asked if the plunge in South East Asian currencies could force China into a competitive devaluation, Chen said: We are confident about the stability of the renminbi (yuan) currency because China is a vast country with great potential. Although there is some pressure from the import/export trade, when we lower the production costs and make certain adjustments, pressures (on the currency) can be alleviated, he said.

China's lower labour costs would also protect its exports, he said.

Chen also referred to a restructuring of the Chinese economy but declined to elaborate. A source in Beijing said on Wednesday that the annual session of the National Peoples Congress was scheduled to review a proposal to streamline the bloated government bureaucracy by spinning off corporations under the ministries.