Renminbi Exchange Rate Abolishing Floating Fear Custom and More Flexible

category:Finance
 Renminbi Exchange Rate Abolishing Floating Fear Custom and More Flexible


Strictly speaking, China is currently implementing a managed floating exchange rate system based on market supply and demand, with reference to a basket of currencies for adjustment. However, since the exchange rate reform in 2005, it is a definite policy option to continue to promote the expansion of exchange rate volatility. After the RMB exchange rate broke 7, Yi Gang, the governor of the Peoples Bank of China, promised not to devalue competitively, to use the exchange rate for competitive purposes, or to use the exchange rate as a tool to deal with external disturbances such as trade disputes. In other words, it may be said that China has no intention of fighting a currency war or even a financial war. But the more flexible exchange rate of RMB can strike speculators who unilaterally bet on RMB appreciation or depreciation, which is more conducive to the choice of macro-control policies at home. Given the robust fundamentals of Chinas economy, it may be expected that an increase in the flexibility of the RMB exchange rate does not imply a substantial devaluation of the RMB. For Chinese enterprises and ordinary people, getting rid of the phobia of exchange rate fluctuation and getting used to a more flexible RMB exchange rate still requires a lot of work. Although many enterprises are familiar with exchange rate risk, the increase of flexibility, especially under bilateral fluctuations, may also mean the increase of risk. Chinas enterprises are deeply integrated into the global economy. In addition, international trade and investment settlement are still dominated by the US dollar, and exchange rate flexibility is enhanced, which means that enterprises need to use appropriate tools to effectively control exchange rate risks and avoid risks and potential losses. This is especially true for companies with dollar debt positions. Source: Responsible Editor of Economic Observer: Yang Qian_NF4425

Strictly speaking, China is currently implementing a managed floating exchange rate system based on market supply and demand, with reference to a basket of currencies for adjustment. However, since the exchange rate reform in 2005, it is a definite policy option to continue to promote the expansion of exchange rate volatility. After the RMB exchange rate broke 7, Yi Gang, the governor of the Peoples Bank of China, promised not to devalue competitively, to use the exchange rate for competitive purposes, or to use the exchange rate as a tool to deal with external disturbances such as trade disputes. In other words, it may be said that China has no intention of fighting a currency war or even a financial war. But the more flexible exchange rate of RMB can strike speculators who unilaterally bet on RMB appreciation or depreciation, which is more conducive to the choice of macro-control policies at home. Given the robust fundamentals of Chinas economy, it may be expected that an increase in the flexibility of the RMB exchange rate does not imply a substantial devaluation of the RMB.

For Chinese enterprises and ordinary people, getting rid of the phobia of exchange rate fluctuation and getting used to a more flexible RMB exchange rate still requires a lot of work. Although many enterprises are familiar with exchange rate risk, the increase of flexibility, especially under bilateral fluctuations, may also mean the increase of risk. Chinas enterprises are deeply integrated into the global economy. In addition, international trade and investment settlement are still dominated by the US dollar, and exchange rate flexibility is enhanced, which means that enterprises need to use appropriate tools to effectively control exchange rate risks and avoid risks and potential losses. This is especially true for companies with dollar debt positions.