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People's Daily Online>>China Business

No need for panic over RMB fluctuations (3)

(People's Daily)

09:29, December 11, 2011

Slightly weaker RMB helps stabilize economy

The general view of a weakened RMB in some degree is that it helps to stabilize exports and economic growth. And China's export enterprises will be the first beneficiaries.

Liu said that the RMB exchange rate mechanism for two-way volatility will force many companies and individuals to consider more rate risks and will make the RMB exchange rate more flexible. Other analysts believe that this current volatility will lead to the reversal of cross-border capital flows, reducing enthusiasm for flowing speculative capital into China, a significant reduction in the pressure of international hot money inflows, reducing the foreign exchange and will help to control inflation.

The RMB exchange rate fluctuation also raised concerns about the foreign exchange reserves for the central bank. Reuters reported that the foreign exchange assets of the central bank were in decline for the first time in October this year in nearly eight years.

Because of the concerns about the European debt crisis and gloomy prospects for global economic recovery, commercial banks and other financial institutions would like to hold foreign currency assets in anticipation of devaluation of the RMB. If the RMB exchange rate continues to decline, the foreign net assets of the central bank will drop again.

Xie said that the rate of RMB appreciation will slow down for the long term, but in short term, volatility will continue to exist and the RMB depreciate to the lower limit again at the end of the year. The volatility of the RMB is expected to continue next year in the current market.

The central bank can stabilize the market with the central price of RMB exchange rate to stabilize the domestic market. But it cannot interpose foreign markets, which will be severely affected. The overseas market hopes to receive explanation for the continuous dropping-limit of the RMB to enhance investors' confidence.

【1】 【2】 【3】


 
 
 
 
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wende at 2011-12-1271.251.41.*
this should show to US that RMB does reflect market condition and not manipulated by China"s central bank
  

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