People's Bank of China, Notice on Improving the Reform of the Renminbi Exchange Rate Formation Mechanism

Issued: July 21 2005

Main contents: From July 21 2005 onwards, China will implement a managed float exchange rate system that is based on market demand and supply and adjusted by reference to a basket of currencies. Renminbi exchange rate will no longer be pegged to the US dollar only (Item One). The People's Bank of China will, after the market closes on each working day, announce the closing exchange rates of such trading currencies as the US dollar against the renminbi on the inter-bank foreign exchange market, to be used as the median price for the transactions between the respective currencies and the renminbi on the next working day (Item Two). At present the transaction price between renminbi and the US dollar on the inter-bank foreign exchange market may fluctuate within a band of plus or minus 0.3% from the median transaction price against the US dollar as announced by the People's Bank of China. The transaction price between renminbi and other currencies on the inter-bank foreign exchange market may fluctuate within a certain band around the median transaction price against those currencies as announced by the People's Bank of China (Item Four).