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��Home>>China Observer
China will get used to new RMB currency regime
www.chinanews.cn 2005-07-25 13:48:57
Chinanews, July 24 (By Li Peng) - After China's central bank announced
the formation of a new RMB currency regime, Zhao Xiao, director of the
Macro-Strategy Department of the Research Center of the State-owned
Assets Supervision and Administration Commission, said, when interviewed
by reporters, that there are risks to adjusting the RMB currency regime,
but there are also risks in not making the adjustment and that China
should accustom itself to the "era of changing RMB".
On July 21st, China's central bank suddenly announced that the RMB would
no longer solely peg the U.S. dollar and will form a better and more
flexible RMB currency regime. Zhao believed that the central bank's
adjustment was timely. At present, the macro economy is relatively good,
growth remains high, inflation low and exports are still surging and
record trade surplus and forex reserves. Therefore, China has the
initiative to make the RMB adjustment.
Zhao said to reporters that the 2% appreciation in the RMB should be
acceptable to the business world. In implementing a self-starting,
gradualist and controllable trial balloon change, the move has been
welcomed by various countries. One can say the small change has achieved
a relatively good effect. At the same time, the room for the RMB to
fluctuate has expanded, signifying that the marketization of the RMB has
made an important move. This direction is worth confirming by the recent
change.
Regarding the change in the RMB, Zhao believed that the change was normal
and was necessitated by the marketization and must not be politicized. He
predicted that the greater marketization in currency control would be an
important content of China's economic change in type. Business and
individuals should gradually adapt to the "era of fluctuating RMB", get
used to it and be prepared for changes in the currency. He said, "the RMB
can already have small fluctuations. Now that the door is open, it is
difficult to say how strong the wind will be, but there should not be too
much fluctuations in the near term."
Will the RMB adjustment bring risks? Zhao said the adjustment would
entail certain risks, but doing nothing would also be risky. According to
the average General Equilibrium Theory, pressure created by imbalances in
the forex market would spread to other markets. The small RMB adjustment
can quickly release such pressure and risk. He said that currency and
interest rate changes were both monetary tools for effectively
implementing macro control policies. Macro controls, had they used such
parameters earlier, would not need to have so many different measures and
the value of the system and the non-trade sector within the country would
not have to pay such an excessive price.
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