Shanghai Securities News reports that yesterday, People's Bank of China (PBC) Governor Zhou Xiaochuan denied the hearsay that China would readjust RMB exchange rate next January. He also indicated that PBC has no fixed arrangements for swap business.

At the Caijing Magazine annual meeting held yesterday, Zhou criticized the economic forecast in a transition period, pointed out some aspects that need improvement, and said that attention should be paid to intrinsic flexibility of the Chinese economy.

Zhou deemed that during the transition period, economic forecast shall prevent "rigid assumptions," such as rigid price level despite manufacturers' consumption of materials and consumers' demands, rigid import and export, stagnant labor force, laborers and wage level, inflexible investment and interest rates, and no bankruptcy or shutdown of enterprises.

Zhou stressed that a flexible Chinese economy will see ebbs and flows. Therefore, economic forecast should focus on digging out and manifesting intrinsic relations. Accelerating flow of work force, growing proportion of private enterprises as well as small and medium-sized enterprises, plus intensifying market-oriented reform will help enhance flexibility of the Chinese economy. He suggested that economic forecast value adoption of basic theories, analysis of changeable factors, and studies on countable common proportion, production function and utility function on the basis of econometric theories.

"Some deem that economic transition should take the 'shock therapy,' but China's step-by-step reform has proved its favorable effects," said Zhou, "we must take intrinsic flexibility into full account when analyzing how an economy should handle its future."
 
(China News Service December 13, 2005)