BEIJING, Dec. 26 (Xinhua) -- No factors are seen in China’s economy that will lead to Renminbi depreciation and the anticipated economic growth and inflation rates of China and the United States show that the long-term changes in the exchange rate of Renminbi to the US dollar is steady appreciation, PBOC Monetary Policy Committee member Fan Gang was quoted by the People’s Daily as saying recently.
Fan holds that Donald Trump promised large scaled infrastructure construction during his election campaigns. That is good for developing countries that produce bulk goods. This factor will soon reveal its effect. From a long-term point of view, the exchange rate between the two currencies is determined by the comparison of two economic variables: economic growth speed and inflation rate.
“It can be expected that in a long period of time to come, China’s economic growth rate will be nearly twice as much that of the United States and China’s inflation rate will not be higher than that of the United States. All these foretell that the long-term changes in the exchange rate of Renminbi to the US dollar will be steady appreciation,” he said.
Fan noted that some new economic data indicate that China’s economic growth is stabilizing and the PPI deflation has ended and the surplus production capacity and corporate debts and other problems are beginning to be resolved and eased. “Looking into the future, we have not seen any factor in China’s own economy that will lead to depreciation of Renminbi,” the economist said.
Earlier, some people worried that the overheated real estate market was likely to have bubble risks. But, thanks to the timely regulatory policies by the governments at all levels, there have been not big bubbles on the property markets and instead the markets have begun to gradually become steady. Besides, the document on improving the property right protection has enabled private investment to arrest its declining trend.
Fan Gang said that the exchange rate of Renminbi to the dollar is subject to the influence of other factors. The currencies of other countries are likely to depreciate by a big margin due to their domestic factors and that will bring about depreciating pressure on the exchange rate of Renminbi. For instance, Brexit could cause the British pound and euro to depreciate significantly and it will, in turn, have an impact on the exchange rate of Renminbi. Besides, the currencies of some emerging market economies have been depreciating significantly and that, too, will have some impact on the Renminbi exchange rate, but continuous depreciation is not likely.
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