U.S. Treasury also admitted in its semiannual report on international economic and exchange rate policies in April that the RMB was under pressure against the U.S. dollars in view of China's net capital outflows in recent quarters and the country's moves to cut interest rates. Despite the depreciation pressure, the RMB real effective exchange rate has been appreciated greatly since the end of 2014.
Some Fed officials also believed the China's move might be appropriate. New York Fed president William Dudley said on Wednesday that "obviously if the Chinese economy is weaker than maybe what the Chinese authorities anticipated, it's probably not inappropriate for the currency to adjust in consequence to that weakness."
Following the sharp adjustment of the RMB in value, some critics argued that the move suggested the Chinese economy is weakening and that it was part of China's efforts to boost its exports against the background of slowing economy.
However, Lardy considered the evidence in favor such kind of arguments "fairly weak". He said in a PIIE's interview on Thursday that China could have boosted its exports and growth with a cheaper currency two years ago.
The critics have misinterpreted China's recent move by overlooking the fact that service sector has become the driver for growth and paying too much attention on the slowing industrial data, said Lardy, adding that the Chinese economic growth remains stable at 7 percent despite the slowing industrial data, and China 's growth model has changed with service sector now as the driver of the growth.
Rosen also pointed out that "Beijing cares more about avoiding capital flight driven by depreciation concerns than it does about boosting exports with a cheaper currency."
Actually, China's move has been welcomed by some international institutions. The International Monetary Fund (IMF) described in a recent statement that the Chinese central bank's move as "a welcome step," saying a more market-oriented exchange rate would facilitate the SDR (Special Drawing Rights) operation if the RMB was included in the basket.
Greater exchange rate flexibility is important for China as the country strives to give market forces a decisive role in the economy and is rapidly integrating into global financial markets, the IMF said. It also said that China can and should aim to achieve an effectively floating exchange rate system within two or three years.
