Subject: Double Favourable Balance of the Exchange Rate of RMB and International Balance of Payment

Questions:

• The government wants to slow down the build up in the PBOC's FX reserves by encouraging people to buy dollars. But the yuan is widely seen as a one-way bet, destined to rise further. So what concretely can Beijing to encourage more buying of FX?
• At what exchange rate would you sell yuan and buy dollars?
• The easing of capital controls on April 14 was a step in the direction of making the yuan a more freely traded, market-driven currency. What will be the next steps?
• How high would the RMB have to rise before exporters are hurt? The trade surplus, after all, rose 41 percent in Q1.
• Apart from letting the yuan rise, what can the government do to promote more imports? Expanding domestic demand by building a social security net will take years: are there any short-term measures that would work?
• A debate is taking place about the merits of ever-increasing FDI. Critics fear foreign domination of key sectors. Should the government take steps to dampen FDI?
• The Grassley-Baucus bill in the U.S. Senate envisages sanctions if the U.S. Treasury judges the yuan to be fundamentally misaligned. These sanctions would include blocking an increase in China's voting power at the IMF and refusing to give China? market-economy status. Do you think these threats would be effective?
• What is your judgment of the impact of the Bush-Hu talks as they affect the outlook for two-way trade and the yuan?