2010 Exchange Rate Reform: Floating Exchange Rate Is In Line With Long-Term Interests.

A spokesman for the people's Bank of China (hereinafter referred to as the "central bank") said in June 19th that Internal and external economy The financial situation and China's balance of payments situation, the central bank decided to further promote the reform of the RMB exchange rate formation mechanism, and enhance the RMB exchange rate flexibility.

RMB will not appreciate at a time.

In an interview with Xinhua news agency, a spokesman for the central bank said that the reform of the RMB exchange rate formation mechanism should be further promoted on the basis of the exchange reform in 2005. The RMB exchange rate would not be reassessed once and for all. It is important to adhere to the market supply and demand and adjust it with reference to a basket of currencies.

"The central bank's move has conveyed a clearer signal to the outside world. China's RMB exchange rate reform will continue to follow the principles of initiative, controllability and gradualness, which means continuing to carry out the idea of exchange reform previously identified and the overall policy unchanged." Ding Zhijie, a professor at University of International Business and Economics, said in an interview with Xinhua news agency.

Since the reform of RMB exchange rate system in 2005, the reform of RMB exchange rate formation mechanism has been carried out in an orderly way, and achieved the desired results and played a positive role. With the implementation of the exchange rate reform system, the renminbi is no longer pegged to the single dollar, and the more flexible RMB exchange rate mechanism is gradually formed.

The central bank's monetary policy report shows that since the reform in 2005 to the end of the first quarter of this year, the RMB has appreciated 21.24% against the US dollar, a cumulative appreciation of 9.34% against the euro and a cumulative depreciation of 0.49% against the yen. According to the Bank of international settlements, since March 2010, the nominal effective exchange rate of RMB has appreciated by 14.33%, and the real effective exchange rate has appreciated by 18.28%.

For future RMB rate Li Daokui, a member of the monetary policy committee of the people's Bank of China and professor of Tsinghua University, told Xinhua that in general, China's balance of payments is relatively balanced. In the future, the RMB exchange rate should be a two-way floating trend, and the RMB exchange rate will not appreciate substantially once.

However, compared with the financial crisis period, the RMB exchange rate flexibility will be further enhanced. In accordance with the central bank's regulation, since May 21, 2007, the floating rate of RMB to us dollar exchange rate in interbank spot foreign exchange market has expanded from 3/1000 to 5/1000.

In an interview with Xinhua news agency, a spokesman for the central bank also said that it would continue to dynamically manage and adjust the RMB exchange rate fluctuation in accordance with the floating range of the announced foreign exchange market, so as to maintain the basic stability of the RMB exchange rate at a reasonable and balanced level. At the same time, we must ensure that the fluctuation of exchange rate can be controlled to prevent the market forces from overshooting the RMB exchange rate.

Floating exchange rate is in the long-term interest.

In an interview with Xinhua news agency, a spokesman for the central bank said that further promoting the reform of the RMB exchange rate formation mechanism and improving the managed floating exchange rate system is a choice based on China's national conditions and development strategy, in line with the reform direction of improving the socialist market economic system, in line with the implementation of Scientific Outlook on Development's requirements, and is a deep integration of China's globalization. The need for national interests is in line with China's long-term and fundamental core interests.

The spokesman said that further reform of the exchange rate formation mechanism is conducive to structural adjustment and comprehensive, coordinated and sustainable development. Floating exchange rate can flexibly adjust the internal and external parity, help to allocate resources to the domestic demand sectors such as services, promote industrial upgrading, transform the mode of economic development, reduce trade imbalance and economic dependence on exports.

Two, it is conducive to curbing inflation and asset bubbles. We should enhance the initiative and effectiveness of macroeconomic regulation and control and improve macroeconomic regulation and control capabilities.

Three, it is conducive to maintaining strategic opportunities. As the beneficiaries of economic globalization, it is conducive to achieving mutual benefit, long-term cooperation and common development, and maintaining strategic opportunities and international economic and trade environment conducive to China's economic development.

Li Daokui said, "further reform of the RMB exchange rate formation mechanism means that China's exchange rate policy has ended the special stage of the international financial crisis and has returned to normal." It is understood that the international financial crisis in 2008 brought great difficulties and uncertainties to the global economy and China's economy. China has narrowed the fluctuation of the RMB appropriately to cope with the international financial crisis. Compared to the US dollar from 2005 to 2007, the RMB showed a slow trend towards the US dollar. Since the international financial crisis, the RMB exchange rate with the US dollar has maintained a certain degree of stability.

What needs to be emphasized is that financial crisis At the most serious time, the currencies of many countries depreciated sharply against the US dollar, while the RMB exchange rate remained basically stable. This is undoubtedly China's great contribution to the global economic recovery. Li pointed out that the major countries in the world have also fully recognized the exchange rate policy adopted by China in the financial crisis.

Li Daokui said that the current implementation of further exchange rate reform is an accurate choice made by the state from the overall situation and the timing is well chosen. "The current economy is maintaining a V shaped reversal trend, and China's economic recovery is improving. The focus of the domestic economy is to accelerate the transformation of the mode of economic development and promote economic restructuring. While the international economy continues to recover, the European sovereign debt crisis will not continue to deteriorate as a whole, and the global economy is unlikely to bottom out for the two time. Against this background, it is undoubtedly the best time to choose further exchange rate reform and return to the normal orbit of exchange rate policy.

Advantages of export are greater than disadvantages.

How will exchange rate changes affect businesses and individuals?

In response, a spokesman for the central bank said in an interview with Xinhua news agency that under the current international monetary system with a floating exchange rate in major currencies, exporters must face changes in exchange rates between local currencies and other currencies. Under the condition of market economy, the market environment faced by various economic activities such as production and sales is always changing, including raw material prices, labor wages, market demand, product structure, interest rate and tax rate changes. Many factors are more variable than the exchange rate.

In fact, since China's reform and opening up, the degree of marketization of the economy has reached a higher level. More enterprises already have the flexibility and ability to actively adjust and respond to market changes. From the exchange rate reform in 2005 to the actual situation before the deterioration of the international financial crisis in 2008, the average annual growth of exports reached 23.4%, and the exchange rate sensitive industries, including textiles and light industries, still maintained growth without significant losses and shutdowns.

The central bank spokesman said that overall, exchange rate floating provides impetus and pressure to promote industrial upgrading and raise the level of opening to the outside world, and is conducive to the transformation of the mode of economic development and comprehensive, coordinated and sustainable development.

The further reform of the RMB exchange rate formation mechanism will not increase the cost of banks' foreign exchange transactions. Compared with most countries and regions in the world, the cost of exchanging business between Chinese enterprises and individuals is very low.

A spokesman for the central bank said that at present, the price of foreign exchange and business transactions at the bank counter is based on a certain difference between the foreign exchange price and the real exchange rate in the inter bank market. According to the current regulations, the floating rate of RMB to us dollar exchange rate in the inter-bank foreign exchange market is up to 5/1000 of the middle price of the US dollar transaction. The difference between the US dollar and the RMB's current purchase and purchase of the bank's listing to the customer is not more than one percent of the middle price of the US dollar transaction. The difference between the bid price and the cash price of the cash shall not exceed four percent of the middle price of the US dollar transaction. "We will continue to implement this provision. "

Background: foreign exchange reform in 2005

Since July 21, 2005, China has begun to regulate and manage the floating exchange rate system based on market supply and demand and reference to a basket of currencies. The RMB exchange rate no longer focuses on the single dollar and forms a more flexible RMB exchange rate mechanism. On the same day, the exchange rate of US dollar to RMB was adjusted to US $1 to 8.11 yuan.