EconoChina

A blog on Chinese economy & society

Posts Tagged ‘trading band

There is no RMB revaluation

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All this hoopla will turn out to be, well, hoopla. The vice minister of China’s Commerce Ministry, Zhong Shan, said publicly during the Canton Fair (China’s semi-annual, all important, has to be there, export mainly, trade show) that the RMB exchange rate would stay put. And that the US had already OK this! This talk was given in the context of clearing the minds of exporters who were trying to determine pricing and terms during the show.

Yes, we’re sticking to our view that a widening trading band, and only that, is coming. But China is likely to change its peg to an enlarged basket of currencies in the short term, which ultimately will result in some appreciation as the dollar is going down the tube. Therefore, even though there’s no immediate appreciation, more bones might be thrown before November for appeasement.

And going forward, the RMB is likely to appreciate gradually as China slowly builds its domestic market, as cheaper energy and resources eventually will come to count more to the Chinese than competitive exports.

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Written by Cindy Luk

April 18, 2010 at 11:25 pm