China Not to Drop RMB-USD Peg in Near Future: Analysts

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Last updated at: (Beijing Time) Friday, April 12, 2002

China Not to Drop RMB-USD Peg in Near Future: Analysts

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Chinese renminbi's peg to the U.S. dollar will remain for quite a period although China intends to adopt a more flexible exchange rate system, according to analysts of Nomura and Salomon Smith Barney.

"A dramatic change to the current arrangements looks unlikely," said Pu Yonghao, senior economist of Nomura.

He explained that the Chinese authorities have recently reiterated China's commitment to currency stability.

Besides, China's exports are recovering, foreign direct investment inflow remains robust, and the country's balance of payments appears healthy.

"A new arrangement for the renminbi could intensify the pressure on Hong Kong's economy," he added.

Salomon's senior analyst Yiping Huang thinks that "China still needs to maintain the peg to the U.S. dollars for stability and confidence reasons, although the renminbi is under some pressure for appreciation."

"Once macroeconomic conditions improve significantly, it would probably be in China's interest to move to a flexible exchange rate regime (rather than another kind of peg), given that China is a large, dynamic economy. That, however, is probably several years away," Huang said.

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