People's Daily Online -- Review: Change of RMB system helps China adjust economic structure
People's Daily Online -- Review: Change of RMB system helps China adjust economic structure
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UPDATED: 17:21, July 22, 2005
Review: Change of RMB system helps China adjust economic structure
China's unexpected decision to appreciate its currency, the RMB yuan, on Thursday immediately sent shock waves to the international financial market. Chinese economists hold that a more flexible RMB exchange system will help their country adjust its economic structure.
The RMB yuan, which had been pegged to the US dollar at the rate of one dollar for 8.27 yuan over the past few years, started to be traded at a rate of 8.11 to the US dollar starting 19:00 Thursday, according to an announcement from China's central bank. The pegging system is also being switched to a basket of foreign currencies.
The latest RMB appreciation margin of 2.1 percent will help the Chinese economy change its growth mode, Dr. Gao Huiqing with the State Information Center (SIC) told Xinhua.
"Advancing the reform over RMB exchange rate mechanism is conducive to the alleviation of the imbalance of China's foreign trade and expansion of domestic demand, and the promotion of Chinese companies' competitiveness and level of opening up," Gao said.
According to the National Bureau of Statistics (NBS), in the first half of this year, China's foreign trade volume reached 645 billion US dollars, up 23.2 percent, with a surplus of 39.6 billion US dollars.
With the devaluation of the US dollar in recent years, the RMB exchange rate against other major currencies was actually dropping, which some foreigners claimed was a measure by the Chinese government to stimulate its soaring exports.
Figures show the imbalances of China's foreign trade and the international payment are both exacerbating, with increasing trade disputes with other countries, said Gao.
By the end of June, China's foreign exchange reserve hit a record high of 711 billion US dollars, up 101 billion US dollars from the start of this year, according to NBS figures.
China chose a surprising and correct time to reform its forex system, acknowledged Gao. China's current economy is in a sensitive period, and the US dollar price in the international market keeps going up, all creating a good environment for the forex system reform, Gao said.
The wise decision at the wise time is beyond most people's expectation, said Gao and He Fan, a noted researcher with the Chinese Academy of Social Sciences.
The reform, putting focus on the adjustment of the RMB mechanism, will help the country implement its strategy of sustainable development on the basis of domestic demand, He said.
The central bank said the move marks the start of the building of a more resilient managed floating RMB exchange rate mechanism based on market supply and demand and adjusted in relation to a basket of major foreign currencies.
The central bank will readjust the floating band at appropriate times according to market development conditions as well as economic and financial situations, according to its announcement.
"The 2-percent forex rate change will have a limited impact upon ordinary people's lives," said Gao. Most Chinese do not have much saving in US dollars, and for those with US dollars in hand, the 2-percent change does not mean much, he said.
The 2-percent appreciation will possibly affect on a short run the income of staff in foreign trade enterprises, whose current profit rate is about 3 to 5 percent, Gao admitted.
The small margin of appreciation will help stabilize domestic prices and bring benefits to ordinary consumers since they can buy cheaper imported commodities, some said.
Source: Xinhua
Home >> Business
UPDATED: 17:21, July 22, 2005
Review: Change of RMB system helps China adjust economic structure
China's unexpected decision to appreciate its currency, the RMB yuan, on Thursday immediately sent shock waves to the international financial market. Chinese economists hold that a more flexible RMB exchange system will help their country adjust its economic structure.
The RMB yuan, which had been pegged to the US dollar at the rate of one dollar for 8.27 yuan over the past few years, started to be traded at a rate of 8.11 to the US dollar starting 19:00 Thursday, according to an announcement from China's central bank. The pegging system is also being switched to a basket of foreign currencies.
The latest RMB appreciation margin of 2.1 percent will help the Chinese economy change its growth mode, Dr. Gao Huiqing with the State Information Center (SIC) told Xinhua.
"Advancing the reform over RMB exchange rate mechanism is conducive to the alleviation of the imbalance of China's foreign trade and expansion of domestic demand, and the promotion of Chinese companies' competitiveness and level of opening up," Gao said.
According to the National Bureau of Statistics (NBS), in the first half of this year, China's foreign trade volume reached 645 billion US dollars, up 23.2 percent, with a surplus of 39.6 billion US dollars.
With the devaluation of the US dollar in recent years, the RMB exchange rate against other major currencies was actually dropping, which some foreigners claimed was a measure by the Chinese government to stimulate its soaring exports.
Figures show the imbalances of China's foreign trade and the international payment are both exacerbating, with increasing trade disputes with other countries, said Gao.
By the end of June, China's foreign exchange reserve hit a record high of 711 billion US dollars, up 101 billion US dollars from the start of this year, according to NBS figures.
China chose a surprising and correct time to reform its forex system, acknowledged Gao. China's current economy is in a sensitive period, and the US dollar price in the international market keeps going up, all creating a good environment for the forex system reform, Gao said.
The wise decision at the wise time is beyond most people's expectation, said Gao and He Fan, a noted researcher with the Chinese Academy of Social Sciences.
The reform, putting focus on the adjustment of the RMB mechanism, will help the country implement its strategy of sustainable development on the basis of domestic demand, He said.
The central bank said the move marks the start of the building of a more resilient managed floating RMB exchange rate mechanism based on market supply and demand and adjusted in relation to a basket of major foreign currencies.
The central bank will readjust the floating band at appropriate times according to market development conditions as well as economic and financial situations, according to its announcement.
"The 2-percent forex rate change will have a limited impact upon ordinary people's lives," said Gao. Most Chinese do not have much saving in US dollars, and for those with US dollars in hand, the 2-percent change does not mean much, he said.
The 2-percent appreciation will possibly affect on a short run the income of staff in foreign trade enterprises, whose current profit rate is about 3 to 5 percent, Gao admitted.
The small margin of appreciation will help stabilize domestic prices and bring benefits to ordinary consumers since they can buy cheaper imported commodities, some said.
Source: Xinhua
posted by Eastlaw at Sunday, July 24, 2005
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