Policy Talking Points on the Chinese Economy

来源: 《CHINA FOREX》2017年第3期 作者:Mu Zhiqian

In an effort to gain a better understanding of the state of China's foreign exchange management policies,the renminbi's exchange rate trend and how do the foreign exchange reserves relate to renminbi internationalization,Debra Lodge,Managing Director Global Markets,Head of RMB Business Development North America,interviewed Mu Zhiqian a former consultant to the State Administration of Foreign Exchange. That discussion follows in question and answer form.

Q: "Counter-cyclical factors" are now being considered in the renminbi exchange rate mechanism. What are these factors and what is the basis for including them? Will this become a form of permanent official intervention in the market? Is this measure contrary to the ultimate goal of reform?

A: The measure is aimed at managing expectations. If we include macroeconomic data into calculating the mid-rate,including the growth rate of the Chinese economy or inflation figures,we can get a more accurate picture of economic conditions. This is essential for an economy experiencing structural adjustments. Moreover,the degree of exchange rate volatility varies. Counter-cyclical measures will be playing a very small role in smoothing out volatility. It is a very tricky question,but one thing can be sure of is that the ultimate goal of reform will not be changed. We can make adjustments on the measures used and the path we take. The "counter-cyclical factors" are only transitional measures used in order to achieve a free-floating currency.

Q: It is said that China has an exchange rate mechanism that uses a managed float. Does this mean the PBOC is conducting its strict exchange controls in managing the currency? Can exchange rate fluctuations be smoothed out using market mechanisms?

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