Yuan seen to remain stable in long term
April 14, 2009
THE yuan may appreciate against the United States dollar over the short term but is more likely to remain stable in the long run, analysts said.
The Chinese currency dipped slightly against the greenback last week and ended at 6.8347 last Friday, according to the China Foreign Exchange Trade System. The yuan closed at 6.8320 by the end of the previous week.
The State Council, China’s Cabinet, last Wednesday picked Shanghai and four other cities in Guangdong Province to take part in a trial to settle overseas trade in the yuan rather than US dollars in a move to stabilize the trade and to build up the yuan’s position in the international monetary system.
“The trial settlement in yuan would favor the local currency and boost its appreciation in the short and middle terms,” according to a research note by Standard Charted.
Deng Xianhong, deputy head of the State Foreign Exchange Administration, last Friday said China “will move on with the trial of using yuan in overseas trade settlement and relax the cross-border financing restrictions to shore up support from foreign exchange to the economy.”
China’s exports last month fell by a slower pace of 17.1 percent from a year earlier to US$90.29 billion, the General Administration of Customs said last Friday.
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Yuan may stay strong against dollar / Update-1
December 22, 2008
This an update for those who are interested to the yuan’s exchange rate. The possibility for Yuan’s depreciation is getting lower because of intrest rate cuts of FED in USA. Currency news update :
THE yuan will likely remain strong against the United States dollar as recent rate cuts by the Federal Reserve have reduced the greenback’s appeal, experts said.
The Chinese currency gained against the US dollar last week and finished at 6.8395 on Friday, according to the China Foreign Exchange Trade System. The yuan was at 6.8451 at the end of the previous week.
The Fed lowered the key US interest rate on Tuesday to a record range of zero to 0.25 percent.
“The direct effect of the slash in rates is an overall selling of the US dollar and the weakening American economy is not likely to provide enough support for a strong dollar,” said a research note by Zhang Zhigang, a foreign exchange trader at the Agricultural Bank of China.
Chinese Minister of Commerce Chen Deming said on Wednesday that China will not rely on the yuan’s depreciation to stimulate exports and will maintain a stable currency.
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Will Yuan Depreciate against USD?
December 19, 2008
As the Chinese currency yuan or renminbi appreciated all over 2 years and those buying from China directly felt the rising costs of purchases since the stronger Yuan made the Chinese exports more expensive.
Nearly, for the last 6 months, the currency rate is stabilized at 6.80′s level. However, as the global crisis hit the Chinese economy, there is now the possibility for Yuan’s depreciation. But it is actually very hard because as the rest of the world have deep problems, a China making exports cheaper could or would give way to protectionist reactions against Chinese imports, especially in USA and EU.
Here is Shanghai Daily news about the debate over the depreciation:
ECONOMISTS are divided on the yuan’s movement next year.
Liao Qun, CITIC Ka Wah Bank chief economist, said yesterday he expects the yuan to appreciate 2 percent to 4 percent next year, a “moderate appreciation.” “From a mid and long-term view, the trend of yuan appreciation is irreversible as China continues to integrate with the global economy,” Liao said.
The currency has appreciated 6 percent this year against the United States dollar in the first half with its momentum on hold in the second half after a moderate depreciation in recent weeks.
The People’s Bank of China has said that it will stabilize the local currency and doesn’t rule out depreciation of the yuan.
Liao said he expected the foreign currency to re-emerge as a hot issue when President-elect Barack Obama takes office in January.
“A weaker yuan can help Chinese exporters. However, the question is that when the external demand is shrinking, a relatively cheaper price won’t make big difference,” Liao said. “Only if the yuan depreciated by 20 percent, which is unlikely, can there be a big help for exports. If not, a mild depreciation of the yuan won’t give actual significant help to exporters.”
Lu Zhengwei, Industrial Bank chief economist, had a different view and said depreciation of 10 percent next year would help exports.
“It may be the best timing for the yuan to depreciate since 2002 against the backdrop of the current financial crisis,” said Lu. “Why should China continue to keep its currency up when currencies of other emerging markets are depreciating?”
A depreciated yuan, together with tax rebates, would help exports a lot, he said. “Depreciation is part of a more flexible foreign currency control,” Lu said.
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China’s inflation cools at last
October 14, 2008
Inflation rates are crucially important for China’s economy. To me, it is the most decisive indicator in shaping government policies on economy, finance, trade etc.
For example, the soaring inflation at the beginning of the year was the main reason behind the tightening monetary policy which squeezes credits for factories, makes trade policies restrictive, quickens the appreciation of chinese currency. So every company making business with China needs to follow the inflation gadget to foresee possible risks and opportunities.
China’s inflation cools at last
By Lydia Chen (Sanghai Daily)
CHINA’S inflation rate dropped to the slowest pace since June 2007 with smaller gains in food prices, a boost to policy makers working on adjusting macroeconomic policies to support the country’s economic growth.
The consumer price index, a broad measure of inflation, rose 4.9 percent in August from a year earlier, after gaining 6.3 percent in July, the National Bureau of Statistics said this morning.
Food costs, accounting for a third of the CPI basket, surged 10.3 percent year on year last month. Within the category, meat and poultry prices soared 8 percent in August.
The cost of pork, the nation’s staple meat, increased 1 percent last month from a year ago while cooking oil prices rose 22.7 percent. Vegetable prices were down 0.5 percent last month from a year ago. Grain prices gained 8 percent in the period.
The combined CPI grew 7.3 percent from January to August, the bureau said.
Consumer-price inflation has slowed for four months. February’s 8.7 percent pace was the fastest in 12 years. The central bank’s target for the year is 4.8 percent, the same as the actual rate in 2007.
But producer-price inflation advanced 10.1 percent in August after rising 10 percent in July. The August jump was the fastest pace since at least 1996, according to the bureau today.
The faster producer inflation rate may lead policy makers to introduce more balanced measures to boost growth against the risk that inflation will accelerate again.
China may adopt tax cuts, a slower pace of yuan appreciation and more easing of lending restrictions to protect jobs and avoid an economic slump as export demand falters.
China’s economy expanded 10.1 percent in the second quarter from a year earlier, slowing for a fourth straight quarter, as exports cooled. Many economists said the growth may ease to 9 percent this year.
Profit growth for listed companies slumped in the first half, helping push the key stock index in the Shanghai market down nearly 60 percent so far this year. Weaker overseas demand, rising costs and a strengthening currency have put pressure on exporters of shoes, toys and clothes.
Economists expect China’s monetary policy will steadily turn more growth-friendly, given the concerns and moderating inflation.
In July, the central bank eased restrictions on how much banks can lend. It raised the 2008 loan quotas for national banks by 5 percent and for regional lenders by 10 percent, according to reports by the Goldman Sachs Group Inc, BNP Paribas SA, and the China Merchants Bank Co.
The People’s Bank of China has kept interest rates unchanged this year and hasn’t increased the reserve ratio for banks — the proportion of deposits that lenders are required to set aside — since June.
The Chinese yuan has climbed only 0.2 percent against the dollar this quarter after a 6.5 percent advance in the first half. Gains hurt exporters by making their products more expensive and less attractive in overseas markets.
The government has already cut taxes on exports of textiles and garments and encouraged more lending to small and medium-sized businesses. Officials are working on a plan for as much as 400 billion yuan (US$58 billion) in tax cuts and spending to prevent an economic slump, according to economists and reports in domestic news media.
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Yuan set to regain strength
September 19, 2008
MARKET watchers predict the yuan to recover later this year as a rebound in the United States dollar is expected to lose steam.
The Chinese currency’s appreciation will continue later this year, said Jan Lambregts, a Rabobank economist. He said the government’s control of inflation and a long-term move toward a more flexible exchange rate regime will also back the yuan to climb later this year.
China’s consumer price index, the main gauge of inflation, slowed to 4.9 percent last month from 6.3 percent in July. But the producer price index inched up to 10.1 percent from July’s 10 percent.
Lambregts said the yuan may gain 8.2 percent for the whole of this year, with the currency’s rise slowing to 4 percent next year.
As soon as there is a pause in the US dollar’s rise globally, the People’s Bank of China, the central bank, may take the opportunity to allow the yuan to resume its gradual climb, according to traders
Source: China Daily
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