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Home >> Business
UPDATED: 09:05, January 16, 2005
Beijing will not allow RMB to appreciate
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The central government will not allow the renminbi to appreciate this year, as the market is highly speculative on the revaluation of the currency.

Fan Gang, director of the National Economic Research Institute China Reform Foundation, said this yesterday.

If Beijing allows the renminbi to appreciate in such a market environment, the exchange rate of the currency will see even greater fluctuation, Fan said at a seminar on economic outlook held by MasterCard International in Hong Kong.

Meanwhile, Fan stressed that renminbi revaluation must choose an appropriate time because it is a very sensitive issue, which could bring unemployment shocks that are very hard to deal with on the mainland. Fan said that speculation on renminbi revaluation is very risky and dangerous and as long as the speculation money stays in the market, the central government will not consider the revaluation issue.

In addition, Fan noted that 5 per cent inflation for the mainland last year and an expected 4-5 per cent inflation this year, or a total of about 10 per cent increase in consumer prices, would have actually led to the appreciation of the renminbi.

The rise of interest rates in the US this year will also ease the appreciation pressure on the renminbi, Fan added.

In the long run,renminbi should be pegged with a basket of currencies because the exchange rate of the US dollar is very unstable, suggested Fan.

Yuwa Hedrick Wong, MasterCard's economic adviser for Asia-Pacific, estimated that the economy of the mainland will remain active this year and will drive economic growth in the Asia-Pacific region.

Wong said that because of the complexity of variables in the Asia-Pacific region as well as the whole world, the global economy will meet new uncertainties and complexities, such as greater fluctuation of the US dollar, continuous inflation and consequent rise of interest rates.

Wong believes that the US dollar will see greater fluctuation this year, with a range of 10-20 per cent, and the mainland government will keep raising interest rates.

Furthermore, MasterCard International suggested that as consumer confidence and employment in Hong Kong improves, the stock and property markets rebound, and deflation comes to an end, development in Hong Kong should remain optimistic.

At the same time, the inflow of mainland tourists and capital will drive Hong Kong's economic growth in 2005.

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