On the Economy and the Renminbi
In an effort to gain a better understanding of the state of the economy and China's foreign exchange situation,China Forex interviewed Mu Zhiqian,a former consultant to the State Administration of Foreign Exchange. The discussion follows in question and answer form.
Q:In your opinion,have the Sino-US trade negotiations had much of an impact on the renminbi exchange rate? If so,to what extent?
A:Certainly the negotiations on the Sino-US trade dispute have had an effect on the renminbi. But exchange rates reflect the balance between supply and demand for different currencies. This is the embodiment of the stock and flow of international trade in the form of money. To put it simply,it is a price signal for the global economy. Therefore,trade friction has an impact,but the magnitude of the impact can vary significantly. The trade war has turned into a currency war. That is an escalation that results in huge shocks to the financial markets. We need to ensure we have the ability to deflect these risks.
Q:If a consensus can be reached between China and the United States on trade,will the renminbi appreciate? And if there is no agreement does that point to a depreciation of the Chinese currency?