2011, the current account surplus to GDP ratio had already declined to 1.9 percent, and in 2012 the ratio was 2.3 percent The direction of renminbi exchange rate reform is irreversible China will continue to enhance exchange rate flexibility, and in the near future China is going to increase the floating band of the renminbi even further letting market supply and demand play the fundamental role in exchange rate formation China will also reduce central bank intervention enhance the self-rebalancing capability of foreign exchange market, and improve the self-pricing and risk management capabilities of the financial institutions Exchange Rate and real Economy Adjustments The exchange rate and the real economy are interlinked naturally. when exchange rate adjusts, the real economy will be influenced by the exchange rate and reflect the exchange rate changes in its own adjustment. China has achieved good performance in the first three of four macroeconomic objectives-namely, growth, employment, and inflation. Regarding the fourth objective, balance of payments, China saw a period when its account surplus was relatively large, but in recent years the surplus has started to converge to normal levels The question here is, how can we put this adjustment on a sustainable track? It is very important to emphasize that pursuing a more or less balanced balance of payments account is our goal. And this process of adjustment, which already started years ago, will keep on in the future. The adjustment first started in salary; therefore, we can find a steady increase in labor costs. Recently, especially in the past five years, the labor costs increased even more rapidly6 2011, the current account surplus to GDP ratio had already declined to 1.9 percent, and in 2012 the ratio was 2.3 percent. The direction of renminbi exchange rate reform is irreversible. China will continue to enhance exchange rate flexibility, and in the near future, China is going to increase the floating band of the renminbi even further, letting market supply and demand play the fundamental role in exchange rate formation. China will also reduce central bank intervention, enhance the self-rebalancing capability of foreign exchange market, and improve the self-pricing and risk management capabilities of the financial institutions. Exchange Rate and Real Economy Adjustments The exchange rate and the real economy are interlinked naturally. When exchange rate adjusts, the real economy will be influenced by the exchange rate and reflect the exchange rate changes in its own adjustment. China has achieved good performance in the first three of four macroeconomic objectives—namely, growth, employment, and inflation. Regarding the fourth objective, balance of payments, China saw a period when its account surplus was relatively large, but in recent years the surplus has started to converge to normal levels. The question here is, how can we put this adjustment on a sustainable track? It is very important to emphasize that pursuing a more or less balanced balance of payments account is our goal. And this process of adjustment, which already started years ago, will keep on in the future. The adjustment first started in salary; therefore, we can find a steady increase in labor costs. Recently, especially in the past five years, the labor costs increased even more rapidly