China's legislature endorses economic plan
(AP)
Updated: 2006-03-14 18:19

Meanwhile, the premier said Tuesday that China sees no need for further one-off administrative changes in the exchange rate of its currency following a decision last July to drop its direct link to the dollar.

"There will be no more surprises," Wen said at a nationally televised news conference.

Wen said the current system, which bases the value of the Chinese yuan on a group of global currencies, allows enough flexibility for the currency, also known as the renminbi, to fluctuate on its own.

"It is no longer necessary for us to take a one-off administrative means to affect the movement of the renminbi either upward or downward," he said.

China raised the yuan's value by 2.1 percent against the U.S. dollar when it changed its exchange rate system in July, and the currency has risen by about 0.7 percent against the dollar since then.

The United States and other trading partners have been pressing Beijing to raise the yuan's value further, saying it is undervalued and gives Chinese exporters and unfair price advantage.

Chinese leaders say they plan eventually to let the yuan trade freely on world markets. But they say that to do so immediately would lead to financial turmoil and damage China's fragile banks and other financial industries.

Wen also reiterated the government's intention to retain controlling stakes in China's state-owned commercial banks.

"The state must take a dominant, controlling share" in state-owned commercial banks, he said.

State control is necessary to "keep the economic lifeline of the country in the state's hands and fend off financial risks," he said.

China's main purpose in reforming its banking sector is not to establish shareholding entities but to strengthen and improve management and acquire expertise, Wen said.

Foreign banks have poured billions of dollars into investments in China's banks, positioning themselves ahead of Beijing's full opening of the potentially lucrative industry to foreign competition at the end of this year.