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No sufficient condition for large-range RMB appreciation currently
Latest Updated by 2006-07-13 15:04:13
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There is certainly a rather large space for the rise of the RMB exchange rates in the mid and long term, but the condition for large-range appreciation of the RMB is not sufficient at present, the Shanghai Securities News quoted market analysts as saying

The appreciation of the RMB will make a huge impact on the development model of China's economy and socio-economic life. It is difficult for the country to take such changes as the transformation from export-oriented economic growth mode to domestic demand-oriented one and from extensive growth mode to intensive one.

In addition, it is hard for the central bank to control the risk of the rapid RMB appreciation because the forex market is currently only in its initial phase, the tools of forex risks control are limited and the administrative ability of companies requires improvement in terms of forex risks control.

Faced with the appreciation pressure, the cost for the central bank to maintain the independence of its monetary policy is limited since the capital account is still not fully opened and the relevancy of the appreciation and the independence of the monetary policy is limited.

There is a huge gap in prices of productive elements between China and the developed countries such as the United States. Under the situation, the adjustment of the RMB exchange rates could not reduce the trade surplus bewteen China and the developed countries, but could instead enlarge the gap because the developed countries have to accept the Chinese products at cheap prices.
Editor: Yan

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