Source: Xinhua | 2013-1-28 | NEWSPAPER EDITION
CHINA is determined to pursue the internationalization of the yuan on a market-oriented basis, and will closely watch the spillover effects of Japan's ultra-loose monetary policy, Yi Gang, a vice governor of China's central bank, told Xinhua news agency.
"It is the basic policy of the People's Bank of China to let the renminbi (yuan) compete with US dollar or euro fairly in the international market," Yi said in an interview on the sidelines of the annual meeting of the World Economic Forum on Saturday.
In the past, the yuan was not allowed to be used in cross-border trade transactions and investments. "What we are doing now is nothing but remove discrimination against the renminbi and let it act just as other reserve currencies," he said.
On concerns about the potential rise of the yuan, Yi said: "It is just natural that foreigners might have some concerns, but it is not our policy to specifically promote the renminbi, and I hope people of other countries can treat it with calm."
"Whether the pace of the internationalization is a little bit quicker or slower, it is always and completely the choice of the market," he added.
"I would be actually pleased to see people have more confidence in the renminbi and choose it over other currencies thanks to a more sophisticated market, better implementation of China's monetary policy, China's macroeconomic stability and social stability, and stronger rule of law," he said.
Yi also said China will have to watch closely the spillover effects of Japan's newly adopted ultra-loose monetary policy.
"We will closely watch the spillover effects of the new Japanese policy on the world economy, the emerging market in particular," he said.
"Japan aside, the United States and the European Central Bank have also adopted policies of quantitative easing, which would drastically increase global liquidity and cross-border capital flow, either inflow or outflow, which is unstable," said Yi.
Japan's new policy would also "have the risk of triggering a race among countries to devalue their currencies," he said.
Yi said the yuan's exchange rate is "relatively close" to equilibrium level and the supply and demand in the market is generally balanced.