Macro-Finance Salon (No. 45) : Issues on RMB Exchange Rate
2016-12-22 IMI
Mr. Sun first overviewed three major landmarks for RMB exchange rate reform, at the beginning of 1994, July 21, 2005 and August 11, 2015. He believed that since the 8.11 exchange rate reform, RMB exchange rate fluctuation has the following features. Fluctuation became obvious; CFETS, BIS and SDR RMB exchange rate indexes are relatively stable; RMB-USD exchange rate fell considerably; price gap between onshore and offshore RMB is even greater. These features are resulted from both internal and external factors. External factors include employment recovery in US, increase in inflation and dollar index, penetrating “Trump Effect” and slow recovery of EU, Japan and other developed economies. In the perspective of internal factors, China’s macro economy operates within a reasonable range, but the root problems have yet to be tackled, with new ones emerging. In addition, domestic capital flow and expectations for lower exchange rate have considerable impact on RMB exchange rate. He pointed out that US dollar gradually becomes stronger; we will face pressure in depreciation and capital outflow. Balance of payments surplus will decrease and control on capital outflow will be strengthened. Therefore, we will have much pressure in controlling outflow and reserve and stabilizing exchange rate. Relevant policies need to be formulated in advance. Lastly, he made policy suggestions on issues concerning RMB exchange rate regime and reform in the future.
In the Q&A session, audiences raised questions and shared views over Trump’s tax cut and interest rate hike, policies to expand infrastructure construction, foreign reserves, balanced exchange rate and overseas investment. Mr. Sun gave answers to all these questions.
