The last and most important thing is that an economy as big as China's has to rely on domestic demand for long-term sustainable growth. We have to give up the idea of promoting trade and earn foreign exchange through exports at all costs.

The renminbi appreciation is necessary for China to stimulate domestic demand and enhance economic efficiency and is a prerequisite for making any changes to China's "double surplus" situation of current account and capital account or reducing its increasing foreign exchange reserves. Also, it will help to lower the management risks with the huge reserves.

Will a sharp appreciation lead to the shutdown of large numbers of export-oriented companies and affect economic growth or force them to optimize and upgrade their industrial structure?

Taiwan offers a vivid example to clear up such worries. Its economy survived the appreciation of the Taiwanese currency in 1985-86. During the appreciation, soaring costs forced labor-intensive industries generating low value-added products such as shoe and umbrella manufacturers to move out, and the information technology industry, the mainstay of Taiwan's economy today, developed. Another advantage of the appreciation is that the salary gap between Taiwan and the United States became smaller, and many talents overseas returned to work in Taiwan, which drove the economic development and industrial upgrading in Taiwan as a whole.

Is it possible that the currency appreciation could fail to fill the vacancy with value-added industries in time after it drives out low value-added industries?

I don't think a vacancy will appear in China's industrial structure after some companies yielding low value-added products move to other countries due to the renminbi appreciation. It's unlikely to happen. Unlike some Latin American countries with frequent political turbulence and serious inflation, China's political system as a whole is comparatively stable. Its policies enjoy a high level of continuity, the infrastructure is well developed, and the investment rate is high. All these are elements that will support sustainable, long-term economic growth.

To be frank, a country has to encourage more competition and conduct institutional reforms for high-quality economic growth. Taiwan, for example, was determined to develop hi-tech industries to optimize its industrial structure in the mid-1980s and invited many talents overseas to work in the hi-tech parks. In two decades, they accomplished a "mission impossible," and the hi-tech industry has already become the mainstay of the Taiwanese economy. In this sense, we need to pay attention to short-term economic growth, but more importantly, we have to improve the institutional environment. Take independent innovation for example. We want to establish China's own hi-tech industry, but how can we better protect intellectual property rights? We have made achievements in this field and should not slacken off. When we remove the institutional shackles, the industry will find a way to develop.

Ronald McKinnon, an economics professor at Stanford University in California, believes monetary policy independence is not always the best choice. Hong Kong, for example, fixed the exchange rate of its currency to the U.S. dollar and has delivered excellent economic performance. Why and how did it do it?

It's reasonable in the first place, but the benefit of an independent monetary policy is that it enables a country to adapt efficiently to external economic impacts. Compared with the mainland, Hong Kong's economy is small, and Hong Kong residents are accustomed to the U.S. dollar peg and frequent external economic impacts. Companies in Hong Kong are adept at one anti-inflation measure, which is quickly adjusting their production to changes in the CPI. If local companies are very flexible and able to adjust their production at any time, they can minimize the impact of inflation. It's a symbol of an economy's strength.

If exporters on the mainland are as flexible as their Hong Kong counterparts, they don't have to be afraid of the renminbi appreciation. If they are competitive and capable of real-time adjustments, the Chinese economy will be stronger.