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China reaffirms plans for currency reform

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China will gradually move towards an exchange rate determined to a larger extent by market forces, the nation's top forex official said in a newspaper article.

The remarks by Hu Xiaolian, head of the State Administration of Foreign Exchange, came on the eve of the departure of Chinese President Hu Jintao for a US visit expected to be dominated by trade and currency issues.

"We will further improve the exchange rate mechanism, and incessantly make it more responsive to market supply and demand," she said in an essay published in Qiushi, one of the China's Communist Party's main theoretical journals.

Hu, also a vice governor of the central bank, said the surplus in international payments, boosted by China's enormous trade surplus, made domestic monetary policies more difficult.

"In recent years, the huge surplus in international payments as well as excessive foreign exchange reserve growth has distorted domestic money supply," she wrote.

"This makes it harder for China to leverage its monetary policy tools and jeopardizes the effect of macro-economic controls."

China's foreign exchange reserves, the world's largest, had hit 875.1 billion dollars by the end of March, the central bank said last week.

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