China
will press ahead with changes in its foreign exchange
rate regime, with the country''s central bank saying that
it "let the market play its role" in setting
rates. The People''s Bank of China has also said it will
allow foreign investors to pick up larger stakes in financial
institutions.
The
Xinhua news agency, meanwhile, quoted government officials
as saying that policies to cut over-rapid investment and
credit growth will continue. There are large imbalances
in China''s economic development at present, leading to
persistent fears of overheating.
The
central bank has raised interest rates twice since April,
acting in tandem with the government which has introduced
tougher land-use and environmental standards in an attempt
to deter wasteful investment.
Xinhua
quoted Ma Kai, head of the National Development and Reform
Commission, as saying China should continue making use
of economic, legal and administrative measures to keep
a check on the economy.
''Strengthening
controls''
Though foreign investors could take larger stakes in China''s
financial services industry, the central bank has affirmed,
however, that the State would retain overall control.
"China will strengthen the control of its main financial
institutions in order to safeguard national financial
security," the central bank said.
Three
consecutive years of growth, exceeding 10% a year, have
seen China pass Britain to become the world''s fourth largest
economy. It is on track to record its fourth straight
year of double-digit growth.
Foreign
financial institutions have recently been allowed to buy
into China''s big banks, prior to their listing on the
stock markets. The government now wishes to see foreign
investment boosting the development of regions lagging
behind the fast-growing coastal provinces, however.
Yuan
gains
China''s economy, which grew 10.7% in the first nine months
of 2006 compared with a year earlier, still faced serious
imbalances, the central bank added. According to the bank,
continuing worries were the excessively rapid investment
growth, sluggish consumption demand and a big balance-of-payments
surplus.
Although
consumer prices rose only 1.5% in the year to September,
the bank said these imbalances were adding to liquidity
in the banking system that could fuel inflation.
After
the bank''s announcement on Monday, the yuan achieved its
second biggest daily gain against the dollar since it
was revalued in July 2005. The currency hit a post-revaluation
high for the third straight
trading day, closing at 7.8738 to the dollar. This marked
a gain of 0.20% over Friday''s close of 7.8896. It is also
the second biggest rise since Beijing revalued the yuan
by 2.1% and de-pegged it from the US currency in summer
of 2005.
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