, exchange rate, hedge price, insurance price, and etc, and are managing the risks through information technology ( such as low or zero inventory, shorter production cycle and outsourcing ) and financial instruments. it is important to look at the situation in most industries and companies to assess the impact of exchange rate movements. while some of the industries and companies manage to grow through innovation, others lag behind and are eliminated. vulnerable companies are the first to feel the pressure to adjust, and they should be supported by policies to improve the social safety net and enhance training programs to improve labor force quality and adaptability. the competitiveness of the manufacturing sector as a whole, rather than that of individual companies, should be the focus in measuring the impact of exchange rate movements. similarly, the assessment of the exchange rate regime reform should mainly look at the overall trade situation and the improvement of development quality. information and voice that are prone to systemic deviation need to be assessed properly. exchange rate movements bring gains and losses to different companies. to win policy support, companies tend to highlight the losses in export, profits and employment while play down merits of the reform, such as reduced import costs. this helps generate a negative picture of companies ’ ability to deal with exchange rate movements. therefore, a careful and comprehensive analysis is needed in order to produce a subjective assessment. in summary, the rmb exchange rate regime reform has been advanced smoothly in a selfinitiated, gradual and controllable process since 2005. the reform plays a positive role in supporting the real economy, and creates favorable conditions for meeting macroeconomic management objectives. it helps promote a balanced bop account, expand domestic demand and restructure the economy, and has been important in china ’ s efforts to address various domestic and global developments.

end july 2008, in order to address the deepening international financial crisis, china narrowed the floating range of rmb exchange rate and did not devalue the currency as many other countries did. this contributed much to stabilizing external demand, helped mitigate the impacts of the international financial crisis, and promote asian and global economic recovery. global economy is now recovering and china ’ s economic recovery and upturn is more entrenched. in this context, as approved by the state council, the pbc decided to further the reform of exchange rate regime and enhance the flexibility of rmb exchange rate on june 19, 2010. new challenges may arise as international economic and financial situations evolve, but the reform of rmb exchange rate regime will continue in line with our established policy. ii. the exchange rate regime is consistent with the market - based economic reform in china and an integral part of the restructuring package china has moved into a managed floating exchange rate regime based on market demand and supply with reference to a basket of currencies. this is a right choice based on china ’ s specific circumstances and development strategy. as an important component of the socialist market system and in line with the scientific approach to development, the exchange rate regime is needed in the country ’ s endeavor to deepen reform and opening - up, and adapt to the new situation after china ’ s accession into the wto. in line with china ’ s long - term and fundamental interests, a managed floating exchange rate regime is an inevitable choice that will facilitate economic restructuring and comprehensive, balanced and sustainable development, help strengthen macroeconomic management and facilitate china ’ s economic development at the juncture of strategic importance. the goal of china ’ s economic policies is economic growth, full employment, price stability and a balanced bop account. a package of restructuring measures is needed to address structural problems of high savings rate and inadequate domestic demand. in this package, exchange rate policy plays a role no less important than general industrial policies as it has an impact on domestic and foreign relative price in an aggregate sense. a misaligned domestic and foreign relative price leads to the distortion of domestic prices and undermines the stable, balanced and sustainable development of the economy. a proper mix of other structural policies and exchange rate policy can be more efficient in facilitating a wellfunctioning pricing mechanism. what has been achieved showed that, since the launch of the reform in 2005, the restructuring package has created a basis for exchange rate policy to play a fundamental role in domestic