Spillover effect of Japan's monetary policy

Yi also said China will have to watch closely the spillover effects of Japan's newly adopted ultra-loose monetary policy.

"We will closely watch the spillover effects of the new Japanese policy on the world economy, the emerging market in particular," he said.

"Japan aside, the United States and the European Central Bank have also adopted policies of quantitative easing, which would drastically increase global liquidity and cross-border capital flow, either inflow or outflow, which is unstable," said Yi.

The new policy of Japan would also "have the risk of triggering a race among countries to devaluate their currencies," he said.

Renminbi exchange rate close to equilibrium

On the exchange rate of the Chinese currency, Yi said the renminbi exchange rate is "relatively close" to equilibrium level and the supply and demand in the market is generally in balance.

"The most convincing evidence to support this is that China's newly added foreign exchange reserve last year was the least over the past five years," Yi told Xinhua.

"This means that the central bank doesn't have to intervene in the market on a large scale, and the slower pace of growth in our foreign exchange reserve is a good thing," he added.

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