This, courtesy of my colleague Ed Stevens, comes from the Peoples Daily Online:
III. What are the main objectives and principles for bettering reform of the RMB exchange rte formation mechanism?
RMB exchange rate reform is required to stick to the principle of initiative, controllability and gradualness... Controllability means that the change of RMB exchange rate is controllable in macrocosmic administration...
Uh, OK. This is a little less metaphysical:
Exchange rate reform requires giving full consideration to the influence on macroeconomic stability, economic growth and employment... it should help promote reform and must not run out of control to avoid the emergence of financial market instability and major economic fluctuations. Gradualness means giving full consideration to the bearing capacity of various quarters and pushing forward reform step by step in light of market change.
As for motivation:
II. Why is it necessary to better reform of the RMB exchange rate formation mechanism?
Improving reform of the RMB exchange rate formation mechanism is the inherent requirement for the establishment and perfection of the socialist market economy system, for giving full play to the market's basic role in resources allocation, as well as an important content of deepening reform of the economic-financial system and strengthening the macro-control system, it complies with the requirements of the Party Central Committee and the State Council concerning the establishment of a managed floating exchange rate system based on the market, improvement of the RMB exchange rate formation mechanism and maintenance of a basic stability of the RMB exchange rate at a rational, balanced level, and conforms to China's long-term and fundamental interests, it facilitates implementation of the concept of scientific development and is of important significance to promoting socio-economic all-round, coordinated and sustainable development.
Hmm. So what about this new basket of currency concept?
The RMB exchange rate is no longer pegged to the single US dollar, but rather, in light of the actual condition of China's foreign economic development, a number of principal currencies will be chosen and given appropriate weight to form a package of currencies... Making reference to a package indicates that changes in the exchange rates among foreign currencies will affect the RMB exchange rate, but making reference to a package is not tantamount to keeping watch on a package of currencies, there is also the need to take market supply-demand relationship as another important basis by which to form a managed floating exchange rate.
Now you know.