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	ANNOUNCEMENT OF THE PEOPLE'S BANK OF CHINA ON REFORMING THE RMB EXCHANGE RATE REGIME

	(Announcement No. 16 [2005] of the People's Bank of China, July 21, 2005)


SUBJECT : THE RMB EXCHANGE RATE REGIME; REFORM
ISSUING DEPARTMENT : PEOPLE'S BANK OF CHINA
ISSUE DATE : 07/21/2005
IMPLEMENT DATE : 07/21/2005
LENGTH : 388 words
TEXT :

With a view to establishing and improving the socialist market economic system in China, enable the market to fully play its role in resources allocation as well as to setting up and further strengthening the managed floating exchange rate regime based on market supply and demand, the People's Bank of China, under the authorization of the State Council, hereby makes the following announcement regarding the reform of the RMB exchange rate regime:

1. Starting from July 21, 2005, China will reform the exchange rate regime by moving into a managed floating exchange rate regime based on market supply and demand with reference to a basket of currencies. RMB will no longer be pegged to the US dollar and the RMB exchange rate regime will be of greater flexibility.

2. The People's Bank of China will announce the closing price of a foreign currency such as the US dollar traded against the RMB in the inter-bank foreign exchange market after the closing of the market on each working day, and will make it the central parity for the trading against the RMB on the following working day.

3. The exchange rate of the US dollar against the RMB will be adjusted to 8.11 yuan per US dollar at 19:00 o' clock of July 21, 2005. The foreign exchange designated banks may thereafter adjust its quotations of foreign currencies to their customers.

4. The daily trading price of the US dollar against the RMB in the inter-bank foreign exchange market will continue to be allowed to float within a range of 0.3 percent around the central parity published by the People's Bank of China, while the trading prices of the non-US dollar currencies against the RMB will be allowed to float within a certain ranged announced by the People's Bank of China.

The People's Bank of China will make adjustment to range of the RMB exchange rate floats where necessary according to market development as well as the economic and financial situation. The RMB exchange rate will be more flexible based on market conditions with reference to a basket of currencies. The People's Bank of China is responsible for maintaining the RMB exchange rate basically stable at an adaptive and equilibrium level so as to promote the basic equilibrium of the balance of payments and safeguard macroeconomic and financial stability.