Central Bank: Market Players Should Not Focus Only On The US Dollar.

In the future, market players should not only focus on the US dollar, but should refer more to a basket of currencies. Of course, this needs a process to adapt.

In the short term, the effect of RMB adjustment on a basket of currencies has been reflected.

In December 11, 2015, the China Foreign Exchange Trading Center issued the CFETS RMB exchange rate index, which has aroused wide discussion at home and abroad.

From the perspective of pformation, we should view the opinion of RMB exchange rate from the perspective of a basket of currencies, and continue to analyze the voice of RMB against the US dollar exchange rate from the perspective of bilateral exchange rate. This reflects that the habit of the RMB exchange rate between the US dollar and the US dollar has been deeply rooted in the past, and it needs to be further discussed.

First of all, our country has long adhered to a regulated and managed floating exchange rate system based on market supply and demand and reference to a basket of currencies.

Since the reform of the exchange rate system in 2005, in addition to the fact that China is a big global responsible country with a larger share of the exchange rate management, most of the time the RMB exchange rate has been operating under this system framework.

Of course, reference to a basket of currencies is not equal to a basket of currencies. Instead of adjusting the RMB exchange rate mechanically according to the exchange rate index of Basket Currencies, it is also necessary to take market supply and demand as another important basis, plus necessary management, and finally form a flexible floating rate.

Secondly, we should observe that the RMB exchange rate mainly depends on a basket of currencies, but the market needs a certain time to gradually adapt to this perspective.

Because of the different economic cycles in different economies, the monetary environment and terms of trade can not be exactly the same. Sometimes the trend is reversed. Only maintaining the stable exchange rate of RMB against a single currency means that the exchange rate may be distorted, resulting in the accumulation of imbalances, which is not conducive to enhancing the resilience of the economy to external shocks.

In view of this,

Since 2005, the introduction of a basket of currencies has been introduced.

The main body of the market has always considered a basket of currencies in foreign exchange pactions. Especially large commercial banks and other institutions have built their own basket of currencies, so as to refer to a basket of currencies in foreign exchange pactions. However, many institutions still refer to the US dollar for the sake of simplification.

Third, in the short term, the effect of RMB adjustment on a basket of currencies has been reflected.

In the short term, the change of the bilateral exchange rate to a single currency reflects to a large extent the different position of different economies in their respective business cycles.

As a weighted average exchange rate, exchange rate index can reflect the value changes of a currency more comprehensively.

From the beginning of this year to December 11th, the CFETS and the reference BIS basket currency are RMB.

The index rose by 1.45% and 2.28% respectively, and the RMB exchange rate index of reference SDR basket currency depreciated slightly by 0.48%. The difference of the index shows the different weights of each index.

Overall, this year's indices show that the renminbi is basically stable against a basket of currencies.

Fourth, from a long-term perspective, the RMB exchange rate is basically stable at a reasonable and balanced level.

First of all, although China's economic growth is shifting from high speed to high speed, it is still relatively high in terms of global comparison.

Secondly, the growth of labor productivity in China is still higher than that of other major economies.

It provides strong support, while the decline in commodity prices is conducive to saving import expenditure, enabling our state to maintain a certain scale of trade surplus.

In the first 11 months of this year, the surplus in goods trade reached US $539 billion 100 million.

Three, after the RMB has joined the SDR as the reserve currency, the scale of RMB assets held by foreign entities will gradually increase, and a new logic of market observation of RMB exchange rate is gradually being established.

Four, China's foreign exchange reserves are abundant, the financial situation is good, and the financial system is sound.

Therefore, it is fundamental to maintain the basic stability of the RMB exchange rate at a reasonable and balanced level.

Reference to a basket of currencies is not equal to a basket of currencies, rather than mechanically adjusting the RMB exchange rate according to the exchange rate index of Basket Currencies. It is also necessary to take market supply and demand as another important basis, plus necessary management, and finally form a flexible floating exchange rate.