MNI POLICY: Crucial To Keep Yuan Exchange Rate Stable: Sheng

     BEIJING (MNI) - China's yuan should be on a long-term upward trend, backed

by a strong economy driving growth and potential to compete with major global

economies, Sheng Songcheng, former director of the statistics department of the

People's Bank of China, said in a commentary published by the Xinhua News

affiliated Economic Information Daily on Tuesday.

Here are some highlights from his commentary:

-- China has an adequate, diversified and efficient "policy toolbox" which could

provide support for the currency if needed. 

     -- Basic stability of the yuan exchange rate is conducive to the

development of China's enterprises and economic transformation, especially now

when exports are having a limited overall impact on growth. 

     --A depreciating yuan will hurt in demand imports, particularly high tech

products and high-end services.

     --Yuan stability is also conducive cutting speculative factors when

promoting the steady development of China's economy. At the same time, it could

help avoid ups and downs across financial markets, helping create conditions for

further deepening of exchange rate reform.

     --Enhancing flexibility of the exchange rate and keeping the yuan basically

stable are not contradictory, Sheng said, as enhancing flexibility refers to the

medium and long-term exchange rate system arrangement, which aims to effectively

alleviate external shocks, whilst maintaining the independence and the

operational room of the monetary policy. 

     --Maintaining basic exchange rate stability is not a retrogression of the

exchange rate reform, but an implements an exchange rate policy based on real

market supply and demand, so that the market can form a relatively stable rate

expectation.

     --From the perspective of the international environment, the current

weakness of the U.S. dollar will also help the yuan to maintain a basically

stable exchange rate against it, Sheng added.

--MNI Beijing Bureau; tel: +86 (10) 8532-5998; email: flora.guo@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com