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Economy

RMB central parity system adjusting to better reflect market development

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2015-08-14 15:52Xinhua Editor: Gu Liping

"(China) continuously cuts their currency." "Devalue means, suck the blood out of the United States!" "That's going to be devastating for us."

The remarks were made by one of U.S. presidential hopefuls, Republican candidate Donald Trump after the People's Bank of China (PBOC) announced on Tuesday to adjust its RMB central parity system to better reflect the market development.

To accusations or alarms like these, many economists in China and overseas have their different replies.

The depreciation will boost confidence among exporters, said Lu Dong, deputy manager at the Shanghai branch of China Export & Credit Insurance Corp., but that is not the purpose for China's move, nor will it be the start of massive depreciation.

Upon its move, the PBOC pledged to the world to closely monitor market movements, stabilize market expectations and make sure the central parity of RMB formats in an effective and orderly manner.

Analysts have largely attributed Tuesday's correction to China's response to the International Monetary Fund (IMF)'s call for the currency to better reflect market forces.

There are no grounds for persistent and substantial RMB depreciation as sound economic fundamentals determine that it will re-enter a rising streak, according to Zhang Xiaohui, assistant governor of the PBOC.

Citing some of Trump's remarks, Reuters said "bashing China is a time-honored tradition among U.S. candidates for higher public office".

In fact, China's move has won applause from the IMF which sees it as "a welcome step" allowing market forces to have a greater role in determining the exchange rate.

"Greater exchange rate flexibility is important for China as it strives to give market forces a decisive role in the economy and is rapidly integrating into global financial markets," the IMF said in a statement.

  

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