Is China opening up for an appreciation of the RMB?
Another internet hotspot on my trip and thus another blogpost. I have reported on this before, but this time the signs of a possible appreciation of the RMB comes from Chinese policy makers themselves.
'China’s central bank stoked expectations of further renminbi appreciation on Wednesday by saying the exchange rate could play a role in addressing international payments imbalances (key concept here; see Brad Setser and Dave Altig linked up below).
The statement, in the People’s Bank of China’s second quarter monetary report, came a day before China announced a record trade surplus for the third straight month in July, data that would add to the pressure on Beijing to adjust its currency.
There has been speculation that Beijing is poised to take a bolder approach toward the renminbi after keeping it under tight control since scrapping its peg to the US dollar a year ago.
The renminbi has risen just 1.66 per cent since Beijing’s 2.1 per cent revaluation last July, in spite of soaring trade surpluses and complaints from the US that the currency is undervalued.'
The bank (PoBC) stressed, in its section on policy thinking, that international payment imbalances could “certainly not be resolved solely by relying on exchange rate appreciation”.
However, it said “appropriate use” should be made of the “special effects” the exchange rate could have in efforts to adjust the structure of the economy and achieve “overall balance”.
“As part of a package of measures, the exchange rate can play a certain role in addressing the imbalance in international payments,” the bank said.
For more comments and in-dept coverage see the FT section dedicated to the issue available from the article linked above and the hat tip to this post Dave Altig and Brad Setser. Notice especially how all this is related to the US; hence the international paymen imbalances highlighted above (perhaps basic knowledge but still important) ... Brad Setser's focus on the structural trade relationship the US and China is a good way to see this and remind us that all 'these' issues are interconnected, perhaps more than we initially imagine.