The formation of a proper "mechanism" instead of an exchange rate level will be the key focus of China's future exchange rate reform, said Wei Benhua, a counselor from the People's Bank of China and the former deputy director of the State Administration of Foreign Exchange, the Shanghai Securities News reported Wednesday.

Future yuan exchange rate reform will not be all about one-way substantial appreciations, Wei noted in a conference held yesterday.

"Facts since the reform of (the) exchange rate regime in 2005 have shown that (the) current exchange rate formation system is well adapted to China's current situation," Wei said.

China now uses an exchange rate system that is based on a supply-and-demand relationship. It takes a basket of currencies as a reference for adjustments and floats under appropriate supervision.

Wei noted that the establishment of a mechanism is more essential in the yuan exchange rate reform process, because "exchange rate will be more reasonable under a much more flexible mechanism."

Wei also said that yuan exchange rate must maintain basic stability during the reform to avoid causing negative effects on a national economy that resulted from exchange rate fluctuations.

For more details, please read the full story in Chinese (http://paper.cnstock.com/paper_new/html/2008-06/18/content_61977539.htm).

(China.org.cn by Yan Pei, June 18, 2008)