and external sector resource allocation, and the successful launch of the exchange rate regime has created a more facilitating environment for other reforms, such as the reform of resource prices. moreover, exchange rate policy, together with lifting import control, easing foreign exchange control and accelerating the “ going global ” initiative, has played an important part in halting further accumulation of bop imbalance. improved flexibility of exchange rate also helps make macroeconomic management more proactive and efficient. iii. the positive results since the exchange rate regime reform in 2005 core competitiveness of the corporate sector has been strengthened as a result of heightened efforts to upgrade and innovate products. this facilitated the optimization of export structure and the shift of trade and growth pattern. from 2006 to 2008, the structure of china ’ s exports further improved. the share of machinery, electronic products and high - tech products continued to rise while the export by high - pollution, high - energy consumption and resource - intensive industries had been restricted. the share of export to developing countries and emerging markets went up while that to the developed countries declined. meanwhile, the process of “ attracting foreign investment, technology and management expertise ” and “ going global ” gained momentum, enabling china to play a bigger part in global industrial chain and the international market. being more responsive to exchange rate movements, large amount of export - oriented enterprises conducted proactive financial management and raised selling prices to cover exchange rate losses. improved in quality, china ’ s foreign trade registered further development. domestic demand supported by import expansion and lower import cost helped ease inflationary pressures. from june 2005 to june 2008, china ’ s import volume totaled us $ 2. 729 trillion. a total of 1. 6497 trillion yuan of import cost was saved as a result of rmb appreciation against the dollar. massive technology and equipment imports facilitated rapid improvement of china ’ s capacity and productivity. moreover, yuan appreciation against the us dollar in this period lowered the rmb - denominated price of import products and cushioned the impacts brought by the rise of international raw material price on domestic price level, which directly eased domestic inflationary pressures. resource allocation was optimized, promoting economic restructuring and more balanced development. as a result of macroeconomic policies including exchange rate policy, the industrial structure became more balanced with the service industry contributing 42. 9 percent to gdp growth in 2008, a growth of 2. 6 percentage points from 2005. the geographical distribution of industries improved as the labor - intensive industry accelerated its reallo

enterprise could reach as high as rmb1 million yuan with a maximum of 2 - year maturity, based on a credit line of 20, 000 yuan for each laid - off workers. although it appears that such preferential policies are not very attractive, since the interest rate of credit to small enterprises could float 70 percent above the benchmark rate, commercial banks should be able to completely cover their risks by increasing the risk premium. furthermore, interest and loan losses subsidies should help relieve the commercial banks ’ political worries about credit extension to small enterprises, especially to the private - owned small enterprises. i hope commercial banks could understand this policy and strengthen their credit support to small labor - intensive enterprises so that they could absorb many laid - off workers. 4. effectively use social security platforms at communities to establish credit communities. extension of micro credits involves large workloads, substantial management costs and high risks. rural credit cooperatives have solved such problems by establishing credit households, credit villages and credit towns. in recent years, established urban communities have become the basis of china ’ s political hierarchy and social development in the sense that reemployment services for laid - off workers, social services for retired workers and benefits distribution for low - income households all are conducted on the community platform. because communities understand most deeply local enterprises and households, especially laid - off workers whose livings rely on community services, it is useful to establish a good financial environment and reduce micro credits management costs and risks by establishing credit communities and publicizing financial knowledge. credit community will benefit not only micro credit extension but also other types of loan extension. i wish every commercial bank could participate in the establishment of credit community ; in particular, branches of the people ’ s bank of china at all levels should assist labor and social security departments to establish credit communities to promote implementation of micro credit extensions to laid - off workers. 5. help small and medium sized financial institutions to define appropriate market niche in order for them to provide communities with quality financial services. although we have many national financial institutions, they are not suitable to extend micro credits due to long management chains. social financial services call for community banking services providers that focus on serving local households. micro credit businesses are mostly based in cities and conducted by branches and outlets of financial institutions which are located in urban communities. branches of the people ’ s bank of china at all levels should work closely with the china banking regulatory commission to cultivate development of community banks and help small and medium sized financial institutions to define