An official with China's central bank said Thursday that they would steadily promote exchange rate and interest rate reforms over the coming five years, as they are key to the nation's financial system reform.

Reforming the exchange rate formation mechanism of the Chinese currency Renminbi (RMB), or the yuan, will help fight inflation and assets bubbles and is in line with China's long-term and basic interests, said Zhang Xiaohui, director of the Monetary Policy Department of the the People's Bank of China (PBOC), in an article posted on the website of the bank.

Zhang reiterated that the central bank would steadily promote the yuan exchange formation mechanism and ensure the yuan exchange rate was kept at a reasonable and balanced level.

The market will enjoy more power in deciding interest rates and play a fundamental role in the exchange rate formation, Zhang said.

China began its currency reform to unpeg the yuan against the U.S. dollar in July 2005.

From mid-2005 to the end of 2010, the yuan appreciated 25 percent against the U.S. dollars and 14 percent against the euro, Zhang said.

The central parity rate of RMB against the U.S. dollar was 6.57 yuan per U.S. dollar Thursday morning.

(Xinhua News Agency March 10, 2011)