China will use all possible measures, including the yuan exchange rate , to keep prices under control, Chinese Premier Wen Jiabao was quoted by the official Xinhua news agency as saying.
This is the first time Wen has publicly acknowledged that the exchange rate of the yuan is key to combating inflation. China has in the past used interest rates and bank deposit reserve ratios to keep a lid on prices.
"We must make good use of various pricing and quantitative tools, including open-market operations, bank deposit reserve ratio, interest rates and exchange rates, to manage monetary factors in inflation," Xinhua Wen as saying during a recent visit to the eastern province of Zhejiang.
In response to a direct question on whether China will allow the yuan to rise faster to control inflation, Wen said in March that China would make the yuan exchange rate more flexible but the process of appreciation would be gradual.