Www Currency Trading Strategies I I Currency Trading Strategies K K Yen Currency Trading Strategies Currency Trading Strategies Szh 2010 %D8%B9%DA%A9%D8%B3 %D8%AF%D9%88%D8%B1%D8%A8%DB%8C%D9%86 %D9%85%D8%AE%D9%81%DB%8C %D8%AD%D9%85%D8%A7%D9%85 %D8%B2%D9%86%D8%A7%D9%86 10k Currency Trading Strategies Promote Financial Reform and Innovation, and Support Balanced and Sustainable Development of National Economy－中国人民银行

Dear guests,

Ladies and gentlemen,

It is a pleasure to attend the 9^th China Import & Export Enterprises Conference (CIEEC). In the first year of the Twelfth Five-Year Plan period, it is only appropriate for the conference to choose its theme as “The Next Five Years: Coordinated and Sustainable Development”, and to discuss topics such as how to promote foreign trade structural improvement and upgrading and accelerate implementation of Going Global strategy. This will promote the in-depth implementation of the decisions made by of the Fifth Plenum of the 17^th CPC Central Committee and the Central Economic Work Conference and promote quality and rapid growth of the Chinese economy. Taking this opportunity, I would like to share with you some thoughts on financial sector work in the Eleventh Five-Year Plan period and under new conditions.

1. Adjusted monetary policy stance properly to create a good financial environment for the stable and relatively rapid development of the economy

In the Eleventh Five-Year Plan period, the People’s Bank of China (PBC) faced unprecedented and complex situations. Under the leadership of the State Council, the PBC adjusted the stance of monetary policy in light of the performance of the real economy and financial sector in different phases, by successively adopting prudent, moderately tight, tight and moderately easy monetary policies, took measures to strengthen liquidity management, avoid economic fluctuations, stabilize employment, improve foreign trade structure and balance of payments account equilibrium and keep the value of yuan relatively stable, effectively dealing with the shocks of international financial crisis, and promoting stable and relatively rapid development of national economy.

In 2010, with the sustained and strong recovery of the Chinese economy, the pressure of domestic inflation rose, and potential risks in economic and financial fields increased. While maintaining continuity and stability of policies, the PBC focused on making more targeted and flexible policies in accordance with the new situations. It raised the reserve requirement ratio for 6 times by a total of 3 percentage points and the benchmark rates of loan and deposit for twice by 0.25 percentage points each to move the supply of money and credit from a crisis-response condition back to a normal one. At the end of 2010, the broad money supply M2 increased by 19.7 percent, a deceleration of 8 percentage points from the end of 2009. New RMB loans were 7.95 trillion yuan, a reduction of 1.65 trillion yuan year on year.

At the same time, the PBC took active measures in accordance with the national strategies to promote foreign trade structural improvement and upgrade and to accelerate “going global”. It strengthened window guidance and credit policy guide, encouraged financial institutions to expand export credit business while controlling risks in order to provide further credit support to exporters, particularly those with independent IPRs, independent brands and high added value. It also guided financial institutions to support imports through more credit, especially those imports of high technology, energy and resources products, and consumer goods. Overall, financial institutions have actively followed the macro-economic management measures. Under the principle of sound operation and commercial sustainability, they endeavored to innovate in credit products and diversify services and strengthened support to foreign trade and the “going global” strategy. In 2010, financial institutions’ new RMB trade financing was 369.2 billion yuan, and the outstanding balance at year end was 977.6 billion yuan. New foreign exchange loans for import and export trade credit was US$17.7 billion, and the outstanding balance at year end was US$122.6 billion.

The PBC lunched and steadily expanded the coverage of the pilot RMB settlement of cross-border trade program and the case-by-case pilot program of RMB cross-border investment and financing, facilitating trade and investment. In July 2009, the pilot program of RMB settlement of cross-border trade was lunched, covering Shanghai and four cities in Guangdong province. In June 2010, the scope of the pilot was expanded to cover twenty provinces (autonomous region/municipality) including Beijing and Tianjin. The RMB settlement pilot program applies to cross-border trade of goods and services and other current account items, and geographical restrictions on overseas enterprises were lifted, which means that all foreign enterprises can choose to use RMB as the settlement currency. In the latter half of 2010, RMB settlement of cross-border trade experienced fast growth, with the year end accumulative business volume amounting to 506.3 billion yuan and the number of pilot export enterprises increasing from 365 at the beginning of the pilot program to 67,724. In addition, the PBC also started pilot RMB settlement of cross-border direct investment in Xinjiang province and launched the case-by-case pilot RMB cross-border investment and financing program.

The PBC actively pursued international monetary cooperation in order to create a favorable external environment. Answering the need of neighbor countries and to support bilateral trade and investment, the PBC has signed bilateral domestic currency swap agreements totaling 803.5 billion yuan with monetary authorities of Republic of Korea, Argentina and other countries and regions. It also actively promoted regional monetary and financial cooperation, including the Chiang Mai Initiative Multilateralization (CMIM). The PBC strengthened cooperation with multilateral development institutions. It joined the Inter-American Development Bank and facilitated domestic enterprise participation in the Latin American and the Caribbean market. It strengthened cooperation with the African Development Bank and helped expand the presence of Chinese enterprises in Africa.

2. Deepened reforms in financial sector, enhanced competitiveness of financial industry and supported “going global” of enterprises

In 2010, with the gradual recovery of global economy, the foundation for recovery of the Chinese economy was strengthened and its performance more and more stable. The PBC took the opportunity and furthered key financial reforms.

Firstly, RMB exchange rate regime reform was furthered on the basis of market supply and demand and with reference to a basket of currencies. The RMB exchange rate moved within the announced band in inter-bank foreign exchange market, and remained relatively stable at an adaptive and equilibrium level. The RMB exchange rate against US dollar appreciated 3 percent in 2010 and 25 percent accumulatively since the start of exchange rate regime reform in 2005. As for the performance of the real economy, enterprises have gradually adapted to the post-reform environment. With the shocks of international financial crisis gradually easing, imports are undergoing strong growth, the structures of imports and exports and of export destinations are improved, and the trend of excessive growth of trade surplus is to some extent restrained, reducing inflation pressure. Export continues to grow fast. Enterprises’ ability to adapt to exchange rate fluctuations is evidently improved and the output, performance and employment of foreign trade industry are generally stable. In particular, performance of some labor-intensive enterprises has already exceeded their pre-crisis level. As various reform policies begin to take effect, the impact of exchange rate regime reform will further unfold in terms of facilitating trade structure adjustment, improving economic structure, upgrading industries and achieving sustainable development of the economy.

Secondly, the PBC continued to deepen reforms of large financial institutions. On July 15^th and 16^th 2010, the Agricultural Bank of China went public in Shanghai and Hong Kong, signaling the completion of joint-stock reform of large domestic commercial banks. The China Development Bank also changed from a policy bank to a joint-stock commercial bank. The reforms of the Export-Import Bank of China and China Export & Credit Insurance Corporation progressed steadily. Through reforms, the shareholding and governance structures of Chinese financial institutions are gradually improved. Their ways of operation and management are transformed, capital adequacy ratios and quality of capital are greatly improved, and profitability and risk control ability are significantly strengthened. In particular, China Development Bank and the Export-Import Bank of China have used various policy financing tools to support export of large assembly equipments and satisfy the financing needs of “going global” enterprises. China Export & Credit Insurance Corporation actively uses export credit insurance to enhance the confidence of export enterprises and support them to expand global market shares through flexible trade methods, which has significantly increased export competitiveness and enlarged scopes of trade.

Thirdly, the PBC deepened the reform of foreign exchange management system and facilitated trade and investment. In recent years, the PBC abolished cap management of current account foreign exchange accounts, launched the pilot overseas deposit of export receipt program, further simplified verification procedure of foreign exchange purchase and sale, and allowed multinational corporations to operate exchange rate capital internally within their group companies. It also gradually relaxed capital control and lifted the ceiling on foreign exchange purchase for foreign investment to support enterprises to “go global”.

Fourthly, the PBC enhanced the role of financial markets, quickened financial product innovation to satisfy capital needs of different fund raisers. In recent years, the PBC has endeavored to nurture and develop foreign exchange market. New trading tools like foreign currency pairs, RMB foreign exchange forward, RMB foreign exchange swap and RMB foreign exchange currency swap, etc. were launched to diversity trade and provide financial instruments for enterprises to manage foreign exchange and interest rate risk.

3.  Continue to promote financial reform and innovation and support the balanced and sustainable development of national economy.

The economic situations are still complex at home and abroad. Globally, although the turmoil caused by the financial crisis has gradually eased, and world economy is slowly recovering, the momentum of recovery is still fragile and there are a lot of destabilizing and uncertain factors. United States and other countries are implementing another round of quantitative easing monetary policy. The subsequent loose global liquidity will intensify the pressure of capital inflow, local currency appreciation, inflation and asset bubble in emerging markets. In particular, some countries are still faced with the potential risks of sovereign debt crisis, the global financial system remains fragile, and a large number of toxic assets are to be disposed of. At home, despite the favorable conditions to support fairly rapid growth, there are problems such as high inflation expectation, higher real estate prices in some large and medium cities and the continuous net inflow of foreign capital, in addition to the long-term and deep-rooted structural problems such as the imbalance of national economy, disequilibrium of the balance of payment, uneven development between urban and rural areas. Going forward, the task of macroeconomic management will be arduous; the PBC will follow the arrangements made at the central economic work conference and focus on the following aspects: