Connect with us

China

China central bank to promote reform of Yuan exchange rate

China’s central bank said on Saturday it will promote further reform of its exchange rate mechanism, but maintained there is no basis for “large swings” in the currency.

Olivier Languepin

Published

on

Chinese currency Yuan official name Renminbi

China’s central bank said on Saturday it will promote further reform of its exchange rate mechanism, but maintained there is no basis for “large swings” in the currency.

Excerpt from:
China central bank to promote reform

The yuan’s under-valuation stands to lower European exports and increase imports from China as spending is redirected from European produced goods to cheaper Chinese goods. The resulting increased trade deficit will directly cost jobs, and reduced demand and profitability of European manufacturing companies will reduce investment spending. Furthermore, European manufacturers will have an incentive to close plants and shift production and new investment to China, just as happened in the US.

Chinese currency Yuan official name Renminbi

The People's Bank of China, China's central bank, has decided to proceed further with the reform of the Renminbi exchange rate regime to enhance the RMB exchange rate flexibility, a spokesperson of the central bank said Saturday.

China has granted Bangkok Bank PCL, Thailand’s largest commercial bank, an exclusive license to clear yuan transactions in the country. The move was part of China’s attempt to expand the role of its renminbi currency in Asia, Bangkok Bank senior executive vice president Prasong Uthaisangchai told The Nation newspaper. Hong Kong will become the first yuan-clearing centre for China. There are now several banks in Hong Kong that serve in this capacity, but in general, China wants to have only one bank in one market.

China has moved into a managed floating exchange rate regime based on market supply and demand with reference of a basket of currencies since July 1, 2005. The spokesperson said the reform of the RMB exchange rate regime has been making steady progress since 2005, producing the anticipated results and playing a positive role. With the current round of international financial crisis was at its worst, the exchange rate of a number of sovereign currencies to the U.S. dollar depreciated by varying margins.

“The stability of the RMB exchange rate has played an important role in mitigating the crisis’ impact, contributing significantly to Asian and global recovery, and demonstrating China’s efforts in promoting global rebalancing,”

the spokesperson said.

The gradual recovery of the global economy and upturn of the Chinese economy has become more solid with enhanced economic stability. It is desirable to proceed further with reform of the RMB exchange rate regime and increase the RMB exchange rate flexibility, said the spokesperson.

The Thai baht has appreciated, but only to the extent of other regional exchange rates. The baht has appreciated 4.9 percent in 2009, compared for example to over 30 percent of the Brazilian real.

The International Monetary Fund’s chief Dominique Strauss-Kahn on Saturday welcomed China’s decision to further reform its exchange rate mechanism and said that the move will benefit Chinese consumers.

China’s announcement is “a very welcomed development,” Strauss-Kahn said in a statement.

The move will help increase Chinese household income and provide the incentives necessary to reorient investment toward industries that serve the Chinese consumer,”

he said.

Key risks to the outlook are political uncertainty and the timing of the withdrawal of fiscal and monetary stimulus. Increased political tensions may have a long-lasting impact on investment, and withdrawal of stimulus (in Thailand and the advanced economies) must be precisely timed to avoid macroeconomic imbalances (including new asset bubbles) while also ensuring that the recovery is on a sufficiently solid footing.

Shipments to emerging East Asia already surpassed the 2008 peak level but those to EU, Japan and ASEAN are slow.

The key risk to the global recovery lies in the need to get the timing of withdrawing fiscal and monetary stimulus just right. Withdrawal of fiscal stimulus too early may lead to another negative demand shock and a negative expectations spiral, whereas withdrawing the stimulus too late may lead to high inflation, further weakening of the US dollar, and possible asset price bubbles. In Thailand, for example, more than ten years since the 1997/1998 financial crisis banks still have bad loans in their books and the government still holds a large amount of debt related to the recapitalization of financial institutions. Given the expected length of recovery, it is important not to withdraw stimulus programs too soon, before the recovery is on a firm footing. On the other hand, macroeconomic imbalances are accumulating and eventually fiscal and monetary authorities, especially in the US, must consolidate their fiscal position and withdraw liquidity.

Comments

China

Hong Kong’s US-Bound Exports to be Labeled ‘Made in China’

Goods produced in Hong Kong and exported to the US must be “marked to indicate that their origin is China”, according to a notice put out by US Customs and Border Protection (CBP) on August 11, 2020.

Avatar

Published

on

This ‘Made in China’ labeling requirement on Hong Kong products was originally to take effect on September 25. To give Hong Kong exporters more breathing room to switch the labels, the US CBP has extended the enforcement date by 45 days, to November 9.

(more…)

Continue Reading

Asean

Global value chains: risk mitigation to reduce dependence on China

Risk mitigation will lead to reduced dependence on China in global value chains, and diversification will benefit ASEAN, but localisation of production will have negative effects for ASEAN producers

Boris Sullivan

Published

on

Risk mitigation will lead to reduced dependence on China in global value chains, and diversification will benefit ASEAN, but localisation of production will have negative effects for ASEAN producers
To continue reading, subscribe today : View subscription options.
Already a subscriber? Sign In here, or use a social media account to login.
Continue Reading

China

Hong Kong : no journalist in the world is free from China’s violent retribution

The new national security legislation China is imposing on Hong Kong could be used not only against journalists operating in Asia’s main financial hub, but against every journalist in the world says RSF

Boris Sullivan

Published

on

Reporters Without Borders (RSF) urges democracies to do everything in their power to compel Beijing to withdraw the law that allows it to charge any journalist writing on Hong Kong of endangering national security, an accusation that could result in life imprisonment or even the death penalty if tried in China.

(more…)

Continue Reading

Cart

Most Viewed

Events Calendar

« September 2020 » loading...
M T W T F S S
31
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
1
2
3
4

Subscribe via Email

Enter your email address to subscribe and receive notifications of new posts by email.

Join 12,884 other subscribers

Latest

Trending