Educating Malaysia the right way

QUESTION TIME By P. GUNASEGARAM
p.guna@thestar.com.my

Improving education quality and making it relevant is needed, not cutting exams.

THAT assessment is largely examinations-based is a significant part of the problems of the education system, but right now that is not the major one because there are so many demands upon the education system, the Govern-ment needs to prioritise them.

But first, let’s deal with the proposal to abolish the Ujian Penilaian Sekolah Rendah (UPSR) and Penilaian Menengah Rendah (PMR) examinations, reportedly to make the system less exam-oriented and provide a more holistic education.

Will it? Most likely not, simply because the problem is not just these two examinations but the overall emphasis on academic results. There will still be examinations at the end of each term etc.

The bad effect of abolishing these exams is we will have no clue as to the standard of our students until they reach Form Five. By then it will be too late to take remedial steps to help the poorer students.

We need UPSR and PMR at least as a gauge to measure the standard of our students. But at the same time, we should look at other means to reduce the emphasis on exams by introducing year-long programmes which are project-based and will take into account extra-curricular activities.

The priority now has to be to improve the quality of education and here are 10 ways to do that.
Yes, many of these steps require time but a start has to be made now.

1. Better quality of teachers. This is simply the most important factor. It calls for the raising of both standards and incentives for teacher education and the continuous training of existing ones. Without this, nothing else will succeed.

2. Ensure a minimal standard of physical facilities for schools. While quality of teachers is most important, all schools must be provided with good basic physical facilities such as a playing field, hall, laboratories, classrooms and everything else that facilitates learning.

3. A syllabus that reflects holistic education. The syllabus itself must reflect the aims of holistic education by including subjects that cover living skills. We should look at greater emphasis on daily commerce – for example opening bank accounts, budgeting and investing.

4. Real emphasis on extra-curricular activities. Emphasis means teachers who are trained in these. Over the years there has been less emphasis on teachers specialising in sports, for instance.
It is necessary to produce teachers who specialise in sports and, within that, in some particular areas of sports.

5. Single-session schools. For proper emphasis on extra-curricular activities and stuff such as additional classes and time for homework, a longer, single-session school would be ideal.

This has been talked about for decades but nothing has happened to date.

6. Provisions for English Langua-ge education. With even science and maths not being taught in English anymore, there is a need to come up with more imaginative ways to ensure that the quality of English among our students improves.

We all know that English is important but we still do very little about it and allow the issue to be repeatedly politicised.

7. Provisions for mother tongue education. The national school system may see an increase in enrolment if adequate provisions are made and time allocated for pupils’ own language or POL classes.

This must not be merely for show and there should be enough hours and resources for a proper education in the mother tongue. A single-session school system will facilitate that.

8. Less politicisation and greater ‘professionalisation’ of education. The emotive issues such as language and culture should be taken out of education and a more accommodative and liberal spirit that takes into account the beliefs of all races and cultures should be part and parcel of the national school system.
Profess­ionals should essentially run education with policy agreed upon and set by the politicians.

9. Continuity of planning – 20-year plans will be good. The education system cannot be left to the whims and fancies of successive education ministers but should be guided by firm policy and a long-term rolling plan of 20 years.

Otherwise, key milestones targeted in earlier years will not be achieved as priorities are shifted elsewhere as new education ministers come in.

10. Keep up to date with education everywhere. Education methods and means are not static anywhere and they constantly change and evolve.

We have to make sure that we keep with the trends by getting people with both breadth and depth and put them in charge of the educational agencies.

Without a doubt, education is a pet peeve among all Malaysians.

The deterioration in quality over the years is terribly worrying and the time for doing something drastic and at the same time constructive is long past.

The rakyat will be eternally grateful to anyone who can put education right so that we start producing a new generation of really educated Malay-sians.
But the question remains as to who or what that will be.

> Managing editor P Gunasegaram started working life 33 years ago as a maths and science teacher in a Government school.

China funds set to flow into M’sia

By RISEN JAYASEELAN
risen@thestar.com.my

Malaysia recognised as approved investment destination by China

PETALING JAYA: China’s banking regulator has recognised Malaysia as an approved investment destination, paving the way for an inflow of Chinese funds into this country, the Securities Commission (SC) said.

The SC said Malaysia had now become an approved investment destination under China’s Qualified Domestic Institutional Investor (QDII) scheme and thereby joined the ranks of 10 other such recognised jurisdictions.

They are Australia, Canada, Hong Kong, Germany, Japan, Luxembourg, Singapore, South Korea, the United Kingdom and the United States.

SC chairman Tan Sri Zarinah Anwar and China Banking Regulatory Commission (CBRC) chairman Liu Mingkang signed letters of exchange in Beijing yesterday to formalise the recognition. CBRC is China’s banking regulator.

Zarinah said in a media statement: “The QDII programme presents a major opportunity for Malaysian capital market intermediaries to gain access to the Chinese market. They should therefore make full use of the opportunity to broaden their reach to this new pool of investors.”

The programme enables Chinese nationals to invest in overseas markets through approved institutions.
The China Securities Regulatory Commission (CSRC) had also confirmed that based on an existing memorandum of understanding with the SC, Malaysia is an approved investment destination under the QDII programme for Chinese fund management and securities companies.

CSRC is China’s capital market regulator.

“With the recognition, approved institutions regulated by CBRC and CSRC may now invest funds pooled from their clients into Malaysian securities, including equities, fixed-income products and collective investment schemes approved by SC.

“Such Chinese institutions may also engage the services of licensed Malaysian fund managers to assist with QDII investment matters,” the SC said.

Bursa Malaysia Bhd said the QDII recognition augured well for the exchange.

“It is aligned with our other initiatives such as improving our country classification for the capital market. We also see this benefiting us in terms of enhancing our attraction as a capital-raising platform for foreign companies, particularly Chinese companies.”

Bursa noted that Malaysia was the second Asean country to be recognised as an authorised market for Chinese investors.

Inter-Pacific Asset Management Sdn Bhd chief executive officer Robbin Khoo said this development paved the way for joint ventures and collaborations between Malaysian fund asset managers and their Chinese counterparts.

“Our relationships can now be reciprocal. Market players can now build relationships where each can be directly involved in the other’s market,” he said.

Khoo added that with Malaysia having promoted itself well as an international Islamic finance hub, there should be keen interest from the part of Chinese investors looking for exposure into syariah-compliant investment products.

It is understood that the Chinese government had mandated the QDII programme to get their institutional and other investors to diversify their funds into different asset classes and different parts of the globe.

“Commodity-based securities or derivatives could be a target investment by China, given its increasing bilateral trades with Malaysia,” pointed out a fund manager familiar with the programme.

It is still unclear how much funds will actually flow into the Malaysian market as a result of this development.
It is understood that Chinese authorities have approved its banks and securities-related firms under the QDII scheme to invest up to US$47.7bil so far. However, it is unclear how much of this has been invested in approved markets.

Canada was the last recipient to gain the QDII status in April. Canadian Finance Minister Jim Flaherty had then said in a statement that the recognition would give Canadian financial markets access to up to US$8bil in investment capital.

China makes good on flexibility vow, yuan falls

China makes good on flexibility vow, and shows that floating the currency does not include one-way bets for appreciation

Enlarge image

22/06/2010 17:06

By Jason Subler and Lu Jianxin

SHANGHAI (Reuters) - China pulled back the veil on its new currency regime a little further on Tuesday, appearing to engineer a fall in the yuan to make clear its vow of flexibility did not include one-way bets for appreciation.
Big Chinese state-owned banks kept the yuan in check, a day after its biggest rise since the currency was revalued in 2005, and the Foreign Ministry said change would be gradual, indicating the yuan's appreciation will be far slower than the pace demanded by critics in the West.
The two-way movement in the yuan is not great by the standard of freely floated currencies but is rare in China, where until this week the central bank had squashed intraday volatility via intervention on most trading days.

China has started to relax its control over the yuan ahead of this weekend's G20 summit of world leaders in Canada, breaking a two-year dollar peg that had been a lightning rod for critics who say the currency is undervalued and gives Chinese exporters an unfair trade advantage.

"China has backed up all the talk with action, and President Hu (Jintao) will arrive in Toronto later this week with tangible evidence that China is serious about increasing the flexibility of its exchange rate," said Brian Jackson, strategist with Royal Bank of Canada in Hong Kong.

"We still may see moves in either direction from day to day, but we think the trend in the weeks and months ahead will be for the yuan to make limited but meaningful gains against the dollar."

Under its new freedom, the yuan rose on Monday more than 0.4 percent, the biggest rise in a day since its landmark revaluation in 2005. It also came close to hitting its trading limit of 0.5 percent, an amount the currency can move either side of a reference point set each morning by the central bank.

On Tuesday, the yuan fell just over 0.2 percent.

The fall disappointed many market players, who had initially thought the central bank's decision to set the reference rate in line with Monday's close was a sign that it was willing to let the currency strengthen further.

State-owned banks stepped in to the market by mid-morning and aggressively bought dollars, traders said, suggesting authorities want to control the pace of the yuan's appreciation.

The People's Bank of China, the central bank, made no secret that it would not allow the yuan to appreciate too fast when it announced the currency reform at the weekend.

The Foreign Ministry reiterated on Tuesday that any change in the yuan would come only gradually.

By allowing for greater ups and downs day to day, though, the central bank will move a step closer to its long-stated aim of developing a more mature market in which companies learn to hedge against foreign exchange risks, part of China's overall efforts to develop Shanghai into a global financial centre by 2020.

The central bank signalled another step on the way to ultimately allowing the yuan to become fully convertible on Tuesday, confirming it would expand a pilot programme under which companies can invoice and pay for imports and exports in yuan.

Still, markets and critics in the United States and other countries are unlikely to be easily convinced of the depth of the currency reforms unless they see a significant rise in the yuan.

Markets surged on Monday after Beijing's weekend vow, on optimism a stronger currency would boost the fast-growing economy's purchasing power.

But doubts about the speed of yuan appreciation had already begun to surface in the United States on Monday. Asian stocks then reversed their gains on Tuesday as investors took profits from the rally on Monday.

Commodities also pared their gains, as did commodity-linked currencies like the Australian and Canadian dollars.

HOW FLEXIBLE?

Many economists see China's currency strengthening further in coming days but at a very modest pace, further diluting hopes for big market gains.

A Reuters poll of 33 economists forecast the yuan would rise to 6.67 per dollar by the end the year, a increase of 2.4 percent from late last week before China's policy announcement and similar to the appreciation implied by offshore non-deliverable forwards.

The central bank is likely using a basket of currencies as a reference for the exchange rate, meaning that if other currencies such as the euro start to strengthen again, the yuan could rise against the dollar with them, said Ha Jiming, chief economist for China International Capital Corp in Beijing.

"There's an automatic adjustment mechanism embedded in this policy," Ha told Reuters Insider TV.
"By using a basket of currencies as a reference, it means that when the dollar appreciates against the euro, the RMB could appreciate against the euro as well but may not necessarily appreciate against the dollar. And the opposite is true."

Even with such increased movement expected in the long run, the challenge for China going into this weekend's G20 summit will be to convince other countries that it has made a genuine move to a more flexible currency.

"We're obviously encouraged, but we'll be monitoring the progress," White House spokesman Bill Burton said in Washington. "Implementation here is going to be key, and so we're just going to be keeping an eye on that."
Canada's Prime Minister Stephen Harper made a similar point.

"The proof will be in the pudding over time," he told Reuters in an interview.

"But I think it's fair to say this is a very positive announcement by China. More broadly it does show China not simply doing some positive things, but China assuming a more global view," he said.

(Additional reporting by Koh Gui Qing and Karen Yeung; additional writing by Wayne Cole; Editing by Neil Fullick)

BP chief sails into fresh storm in US after taking time out for yacht race

 By Angus Howarth

EMBATTLED BP chief executive Tony Hayward is at the centre of a new controversy after he went sailing in the face of mounting criticism that he is not doing enough to control the oil spill disaster in the Gulf of Mexico.

• Tony Hayward's yacht, Bob, one of the 1,754 vessels taking part in the 50-mile race round the Isle of Wight on Saturday. Picture: PA

Video: Shelby: Hayward Must Go CBS

BP boss tries to get his life back, but sails into another storm‎ - Sydney Morning Herald 
Critics Knock Wind Out Of BP Chief's Sails‎ - Sky News

The White House led the hostile comment after Mr Hayward spent time relaxing on the Isle of Wight at the JP Morgan Asset Management Round the Island Race.

The crisis that followed the blast on the Deepwater Horizon well, which killed 11 workers, has seen millions of gallons of oil continuing to threaten the Gulf Coast. It is America's worst environmental disaster and has led to tensions between the United States administration and BP. President Barack Obama's chief of staff, Rahm Emanuel, said Mr Hayward had committed yet another in a "long line of PR gaffes" by attending the race while the disaster continued.

He also mocked Mr Hayward's notorious statement on Facebook that he wished the crisis was over so he could have his life back.

Referring to the yachting, Mr Emanuel said: "He's got his life back, as he would say."

He added that the focus should stay on capping the leaking well and helping the people of the Gulf region.

Charlie Kronick, of Greenpeace, was also angry and said Mr Hayward's actions were "rubbing salt into the wounds" of people whose communities have been affected by the catastrophe.

A BP spokeswoman said: "We wouldn't dream of commenting on what the chief executive does in his rare moments of private time." She added he was spending some time with his son.

It is understood Mr Hayward has spent much of the eight weeks since the accident in the US.

BP officials also insisted Mr Hayward was still in charge of the operation to control the spill, amid confusion over his role.

On Friday, company chairman Carl-Henric Svanberg said Mr Hayward had been relieved of day-to-day control of the spill and that BP managing director Bob Dudley would take over.

However, other officials insisted Mr Hayward remained in charge of the operation.

Shadow foreign secretary David Miliband said Mr Hayward's position did not mean he should not be able to spend a day with his son.

But he added: "Does it mean that he does have to lead the company to deal with this fundamental issue that threatens the whole future of the economy? Yes, it does."

Oil giant 'plans to raise $50bn' to help pay for oil spill clean-up

EMBATTLED BP is understood to be working on plans to raise $50 billion (£33.76bn) to cover the cost of the Gulf of Mexico oil spill – more than double the amount previously thought.

Directors at the oil group are said to have approved a scheme last week to raise the money in a bid to ensure they have enough reserves to cover any claims as a result of the disaster.

The figure is more than double the $20bn the group has already agreed to pay into a compensation fund for those affected by the spill, although analysts have warned the final cost of the disaster could be as much as $100bn.

BP is expected to start raising the cash as early as next week through a $10bn bond sale.

It is also understood to be in talks with banks to raise a further $20bn through loans, with another $20bn to be raised through asset sales during the coming two years.

BP has already scrapped shareholder dividends until the end of the year to help pay for the clean-up operation.

The company pointed out that chairman Carl-Henric Svanberg had said last week that the company needed to have "an unusually strong cash position".

The group is reported to be preparing to take legal action against one of its partners, Anadarko Petroleum, after it said it would not cover any of the cost of the clean-up.

BP owns 65 per cent of the ruptured Deepwater Horizon well, while Anadarko has a 25 per cent stake.

Anadarko's chairman and chief executive Jim Hackett said BP's actions probably amounted to "gross negligence or willful misconduct" and that it should foot the whole damage bill.

New Chinese currency policy lifts markets

By JAGDEV SINGH SIDHU
jagdev@thestar.com.my

Equities, currencies and commodities react positively to unpegging proposal

KUALA LUMPUR: Stock markets, currencies and commodities were given a boost after China signalled the end of its yuan peg to the US dollar.

Markets in Asia posted strong gains led by China, Hong Kong and Japan as investors took positions that a stronger yuan would lead to stronger consumption and demand within China and help drive exports of its major trading partners.

People’s Bank of China over the weekend said it was abandoning its peg to the US dollar, a move taken to shelter the China economy during the recent global crisis, and was reinstituting a managed float it first detailed in July 2005.

The bank said that while there was no large movement in the yuan, the exchange rate would be allowed increased flexibility.

“The yuan flexibility is bullish for a number of Asian currencies,” said CIMB Invesment Bank’s regional rates/FX strategist Suresh Kumar Ramanathan, who expects the ringgit to gradually appreciate against the dollar to RM3.05 by the end of the year.

The yuan moved to 6.79 against the dollar from 6.83 following the revaluation of the currency, its highest level in 18 months.

It was revalued to 8.11 to the dollar in July 2005 and gradually appreciated to 6.81 before it was pegged at around that level to protect its exporters and the economy during the crisis in 2008.

That statement was the catalyst for a spike in Asian stock markets and currencies, all of which posted healthy gains on the back of the stronger yuan.

“We expect equity markets to take the news positively in the short term, boding well for regional risk appetite,” Nomura said in a note yesterday. “However, the implied forward rates of appreciation will likely continue to be overshadowed by global growth concerns and ongoing jitters over European credit markets.”

The ringgit strengthened to RM3.18 to the dollar with the FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) closing up 1.34% to 1335.29.

The ringgit’s jump, sparked by the move in the yuan, was also beefed up by short-covering and stop-loss calls by traders who were long on the dollar.

The breaching of the RM3.24 level against the greenback was attributed to the buying of the ringgit.

Economists felt that the benefit to Malaysia’s economy would depend on just how the yuan moves from here on and an appreciation over time would, nonetheless, be positive for the economy and Malaysian exporters.

Affin Investment Bank chief economist Alan Tan said a stronger Chinese currency would boost consumption and domestic demand but there were risks associated with that if the currency appreciated too fast.

“They cannot risk a strong currency as it could hurt exports. They remain dependent on exports,” he said.
The FBM KLCI extended its winning run to 10 straight trading days with investors buying a plethora of stocks from small-caps to heavyweight stocks in active trade.

Dividend yielding blue chips, such as DiGi.com Bhd and Public Bank Bhd, attracted buying interest along with automakers as investors reacted to the yuan revaluation.

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Editor's note: The decision by the People's Bank of China, the central bank, to "further strengthen the formation mechanism of the yuan's exchange rate and increase the flexibility of the currency" on Saturday has aroused worldwide attention for its far-reaching effect on both the Chinese and global economy. The next day, the central bank released another statement claiming that there would not be a one-off revaluation of the yuan, which is well in line with Chinese economists' expectations, who said outside pressure would not disappear following the latest move.

In the short term, it is more important for the monetary authorities to let the yuan float in a broader band rather than pegging it to a basket of currencies.

Given the recent exchange rate movement of the world's major currencies, if China strictly follows the rule of pegging the yuan to a basket of currencies, it may depreciate substantially against the US dollar. But the central bank will not allow that to happen, especially when the exchange rate issue has become highly sensitive.

The yuan could appreciate 3-5 percent against the US dollar this year. The Chinese authorities will not accept a big increase in the yuan's exchange rate against the dollar, because the yuan's effective exchange rate has risen substantially against the greenback this year and the trade surplus is shrinking.

The new announcement of the yuan's exchange rate regime, which has been interpreted as the start of yuan appreciation, does not mean that outside pressure for yuan appreciation will disappear. The pace and margin of the renminbi's rise against the US dollar will become the main theme for the next round of discussion on the yuan's exchange rate.

Once the yuan resumes appreciation, the authorities must keep a close eye on cross-border capital controls and prevent resurgent excess liquidity as a result of rising asset prices.

China remains in the stage of initial industrialization while the US has entered a post-industrial era.

The root of the huge US trade deficit with China lies in the differences in their economic structures and development levels.

The yuan's exchange rate is neither the main contributor to the bilateral trade imbalance, nor a panacea for solving the issue.

A sharp one-off revaluation of the yuan's exchange rate will significantly increase the cost of living of ordinary Americans, especially low- and middle-income groups, because it would push up the cost of Chinese exports to the US market, thus curbing US domestic consumption, which is important for its economic recovery.

Yuan appreciation will result in a decline in the growth of China's exports, from which migrant workers, China's most vulnerable group, will suffer the most.

Sluggish exports in turn will impact China's long-term efforts to expand domestic demand and transform the economic development pattern.

So far, China is the most powerful driving force for global economic growth.

A slowdown in China would deal a blow to economic confidence worldwide and affect the smooth recovery of the global economy.

The decision of the People's Bank of China, the central bank, to proceed with the reform of the yuan's exchange rate regime is of great significance, because it symbolizes the end of China's temporary yuan peg policy to mitigate the impact of the global financial crisis over the past 23 months. Such a move also indicates China will adopt an independent exchange rate regime without yielding to external pressure.

The move aims to relieve inflationary pressure and promote the structural adjustment of China's export-oriented enterprises.

The yuan's exchange rate will become more flexible and is likely to experience two-way fluctuations in the future, which means the exchange rate of the yuan may either appreciate or depreciate against major currencies. If the euro continues to remain weak against the US dollar or the value of the US dollar rises by a large margin against other major currencies, the yuan could depreciate against the dollar.

Therefore, the central bank's latest move cannot be simply interpreted as the start of yuan appreciation against the dollar. Even if the yuan appreciates in the future, according to historical experience, the central bank will keep the currency basically stable at a reasonable and balanced level and allow the yuan to appreciate in a gradual, moderate and controllable way instead of a sharp one-off revaluation.

The recent adjustment in China's currency policy is a move in the right direction, marking a key step in the reform of China's exchange rate regime towards a more market-based one.

If the yuan rises against other currencies after the latest policy initiative, it should rise gradually, otherwise it could be a heavy blow to the country's export-oriented enterprises.

Mild yuan appreciation will spur export companies to continue to improve their technology and management, but a hasty and big increase in the yuan's exchange rate would be the death knell for these companies. The 11 percent appreciation in the yuan between October 2007 and July 2008 led to the bankruptcies of some 67,000 export companies and mass job losses.

It is expected that the yuan will only go up within a limited range. European economies face the risk of a double-dip and have decided to cut spending to fight the debt crisis, which will definitely affect consumption in those countries and thus pose a threat to China's exports to Europe. If the yuan rises against the dollar this year, the margin would only be very slight. China will allow its currency to appreciate by up to 3 percent only if the country could make sure its exports rise by an average of 20 percent in 2011 and the global economy regains its sound growth momentum.

The central bank's decision helps contain "imported" inflationary pressures and therefore reduces the probability of aggressive monetary tightening through stringent credit controls and/or consecutive interest rate hikes.

This policy move should help contain inflationary pressures in the short term and rebalance the Chinese economy over the medium and long term.

A modest initial revaluation followed by gradual appreciation would fuel expectations of further yuan appreciation over time.

Unpegging the renminbi and a subsequent gradual appreciation against the US dollar should be positive for the stock market, even though a stronger renminbi will likely hurt low margin exporters who do not have pricing power.

Although the central parity of the yuan-dollar exchange rate is, in principle, determined based on the weighted average of the quotes from market makers, it is still heavily managed by the People's Bank of China, which has considerable discretion over determining the weights when the weighted average is calculated.

Thus, the pace of renminbi appreciation ultimately hinges on how comfortable the Chinese authorities are with allowing faster appreciation of the central parity rate instead of intra-day volatility around the central parity rate.

Source: China Daily
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RMB reform restarts, to aid China and world

Analyzing Beijing's announcement over the weekend it will restart the reform of the RMB exchange rate regime, China observers say the move is "wise" which will accelerate the country to climb another step on the industrial ladder.

More than a dozen economists and international investment bankers welcomed Beijing's decision to un-peg the RMB with the U.S. dollar from today, but, they cautioned that China's regulators would try to prevent any big volatility in the exchange rate, which does not help China's and the global economy, and is likely to rein in the scope of the yearly rise of the RMB value against the U.S. dollar within 3-4 percent.

Economists believe an annual 3-4 percent rise of the RMB will be capable of stonewalling speculative "hot money" entering China, which will jeopardize the economy and increase the risks of inflation in the country.

Since the People's Bank of China (PBOC), the central bank, initiated the RMB rate reform in July 2005, China's currency has gained 21 percent against the U.S. dollar. But Beijing pegged the RMB to the greenback in late 2008 when the global financial crisis erupted.

Now fairly ensured the global economic recovery is on a solid footing and its exports had rebounded since April, Beijing finally decided to enhance the RMB exchange rate flexibility, to help squeeze out low-value labor-intensive production, and to sooth rising outside cries that the RMB must be revalued.

U.S. President Barack Obama said China's move is a "constructive step" while the International Monetary Fund director-general Dominique Strauss-Kahn described the move as a "very welcome development".

"China's decision to increase the flexibility of its exchange rate is a constructive step that can help safeguard the recovery and contribute to a more balanced global economy," Obama said in a statement.

The European Union said that "such a move will be beneficial for both the Chinese economy and the global economy," adding that the move would not only benefit China's own economy but also the economy of the world as a whole. EU even hailed the move as "providing an important contribution to the success" of the G20 Toronto summit, which are scheduled for late this week.

Beijing's decision was made in view of the economic situation and financial market developments at home and abroad, and the balance of payments situation in China, the PBOC spokesperson said in a statement.

The reform of the RMB exchange rate regime is to reflect market supply and demand "with reference to a basket of currencies", that including the U.S. dollar, the euro, the yen, the British pound, and other currencies. The exchange rate floating bands will remain the same as previously announced in the inter-bank foreign exchange market, PBOC said.

The statement emphasized the RMB be pegged to a basket of currencies, adding that the US dollar should not be the only gauge for judging the RMB exchange rate level.

The central bank said on Sunday it will not conduct a one-off revaluation of the RMB exchange rate this time, as promised by Premier Wen Jiabao. On July 21, 2005, when China started the reform, it allowed a one-off RMB rise of 2 percent against the U.S. dollar.

U.S. Treasury Secretary Timothy Geithner also welcomed China's decision to further reform its exchange rate mechanism and expected further cooperation with his Chinese counterpart within G-20 to promote the economic recovery.

By People's Daily Online

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