THE government would consider domestic economic stability before deciding the timing and method of the next stage’s reform on the yuan exchange rate mechanism, said a senior official at the State Administration of Foreign Exchange (SAFE) yesterday.

Sun Lujun, a vice director-general of the Capital Account Department of SAFE, said any decisions should take into account possible impact on China’s economic growth and employment.

Sun predicted China’s economy was likely to expand by around 10 percent this year, above the annual official target of 8 percent for 2008.

The government has said it aims to take steps to prevent both risks of economic overheating and a sharp economic slowdown this year.

Sun said China still faced prominent problems of external trade imbalances, which “showed no signs of easing” in the first quarter. Also, the U.S. subprime mortgage crisis, which caused U.S. economic growth to slow down, added to the yuan’s appreciation pressures, he said.

He said he expected the yuan exchange rate to continue to be affected by domestic and international factors but declined to forecast on the trend of the yuan rate in the months ahead.

Sun said the government aimed to prevent any exchange rate reform from causing big swings on the financial market. Meanwhile, the government will also consider the ability of various industries of coping with any yuan mechanism changes. (SD-Agencies)