PARIS (MNI) – The European Central Bank and the group of Eurozone
finance ministers (the Eurogroup) on Sunday applauded the pledge by the
People’s Bank of China to increase the flexibility of the yuan’s
exchange rate.

A joint statement issued by the ECB and Eurogroup President
Jean-Claude Juncker said they welcomed the PBOC decision and encouraged
China to “allow for greater flexibility of the [renmimbi] effective
exchange rate as a means of promoting balanced growth in China and in
the world economy.”

On Saturday, PBOC issued a statement saying it had “decided to
proceed further with reform of the [yuan's] exchange rate regime and to
enhance [its] exchange rate flexibility.”

But the Chinese central bank made clear there would be no big moves
in the yuan’s exchange rate. “With the BOP account moving closer to
equilibrium, the basis for large-scale appreciation of the [yuan]
exchange rate does not exist,” it said. It added that, “the floating
bands will remain the same as previously announced in the inter-bank
foreign exchange market.”

In Washington, U.S. Treasury Secretary Timothy Geithner welcomed
the announcement, saying “vigorous implementation would make a positive
contribution to strong and balanced global growth.”

A verbatim text of the ECB-Eurogroup statement is below:

“The European Central Bank (ECB) and the President of the Eurogroup
Jean-Claude Juncker welcome the decision of the Peoples Bank of China
to further reform the exchange rate regime of the Renminbi and to
enhance the flexibility of the RMB exchange rate.

The euro area continues to have a clear interest in a strong and
stable international financial system, as excess volatility and
disorderly movements in exchange rates have adverse implications for
economic and financial stability.

Given China’s important role in the global economy, we encourage
the authorities to allow for greater flexibility of the RMB effective
exchange rate as a means of promoting balanced growth in China and in
the world economy.”

–Paris newsroom, +331-42-71-55-40; bwolfson@marketnews.com

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