China continues banking and currency reforms
(08 March 2013 – China) China will continue currency and banking reforms this year with efforts to also relax its tight capital controls.
The currency reforms will allow more flexibility in the renminbi’s exchange rate as it value nears its equilibrium.
Yi Gang, Director of the State Administration of Foreign Exchange and Deputy Governor of the People's Bank of China (PBOC), claims PBOC has reduced intervention in the foreign exchange market to ensure the renminbi’s stability.
'We will continue to reform and open up. I'm confident that the renminbi exchange rate will be more balanced and flexible and basically stable,' Yi said. The renminbi exchange rate is closer to its equilibrium."
Foreign analysts said government remarks the renminbi is near its equilibrium seem contradicted by data that appears to show demand for the renminbi might be rising again.
China's central bank and commercial banks bought a record US$110 billion (A$107 billion) in foreign exchange in January. The all-time high purchase indicates capital is flowing back into China.
Massive foreign exchange purchases by PBOC and commercial banks are tantamount to base money creation that can spur inflation. Preventing this means PBOC has to remove the excess renminbi injected into the system.
Yi Gang, Director of the State Administration of Foreign Exchange and Deputy Governor of the People's Bank of China (PBOC), claims PBOC has reduced intervention in the foreign exchange market to ensure the renminbi’s stability.
'We will continue to reform and open up. I'm confident that the renminbi exchange rate will be more balanced and flexible and basically stable,' Yi said. The renminbi exchange rate is closer to its equilibrium."
Foreign analysts said government remarks the renminbi is near its equilibrium seem contradicted by data that appears to show demand for the renminbi might be rising again.
China's central bank and commercial banks bought a record US$110 billion (A$107 billion) in foreign exchange in January. The all-time high purchase indicates capital is flowing back into China.
Massive foreign exchange purchases by PBOC and commercial banks are tantamount to base money creation that can spur inflation. Preventing this means PBOC has to remove the excess renminbi injected into the system.
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