| Author |
Message |
LeiFeng
Raver
Joined: Oct 17, 2002
Posts: 440
Location: Shanghai
Status: Offline
|
 Posted:
Feb 10, 2004 - 03:17 AM |
 
|
| Post subject: "China May Boost RMB Next Month" (Up 5%?!) |
Front page of Shanghai Daily Monday 9th Feb 2004...
Always a favourite topic of conversation whenever expats come together... what do you think? 5% is a big rise. This is one front page of a government controlled paper, so is definitely saying a rise is coming. When it comes most people (include me) are expecting one or perhaps a series of smaller rises, of the 1-1.5% range.
How many people, here for the long term, are going to convert dollars to RMB on the basis of what now seems a definite coming revaluation?
How many people are including clauses on currency revaluation if you are quoting your customer in USD? A 5% rise could potentially devaste low margin exporters with volume contracts and prices already locked in... how are people structuring their sales contracts to mitiigate the ForEx risk?
China may boost RMB next month
---------------------------------------------------------------------- ----------
Shanghai Daily news
A business newspaper in Beijing is reporting that China might revalue its currency in March, lifting the value of renminbi by 5 percent against the US dollar.
A story in Saturday's edition of the China Business Post cited unnamed senior bankers saying if the central bank decides to revalue the currency, it would probably happen next month.
After a 5 percent revaluation, one US dollar would buy 7.887 yuan, compared with 8.277 at the current exchange rate.
The story said the value of the Chinese currency could rise by a further 5 percent in 2005.
Despite pressure from the United States, Japan and several other major trade partners, the People's Bank of China said in December that the country would keep a basically stable exchange rate as part of its monetary policy.
Many foreign economists have, however, speculated that China would revalue its currency sometime this year. Goldman Sachs Group Inc said in a recent report that it expects an initial one-off renminbi revaluation of 2.5 percent against the US dollar in the first quarter of 2004.
The company also said it expects China to peg the renminbi to a basket of currencies instead of linking it directly to the greenback.
The PBOC is reportedly considering pegging the renminbi to 10 currencies, which would prevent it from falling too far against the euro or yen at a time when the US dollar is down, such as it is now.
The weights of the 10 currencies would be benchmarked to the relative importance they play in China's trade and direct foreign investment.
Meanwhile, Geoffrey Barker, HSBC's chief economist for the Asia-Pacific region, said recently that there should be a window of opportunity to introduce greater flexibility into the renminbi's exchange rate policy in the middle of this year as the US economy has not fully recovered yet.
"We do not expect a large one-off revaluation in the renminbi, we think it will be a gradual move," said Barker.
Zhou Xiaochuan, governor of the Chinese central bank, said in January that China is under less pressure to revalue the renminbi than it was early last year as its trade surplus with the rest of the world is growing at a slower rate than in the past.
China reported a trade surplus of US$53.15 billion with the United States for the first 11 months of last year, a year-on-year rise of 37.3 percent. While the surplus is still growing, the growth rate is down from 47.8 percent during the first 11 months of 2002.
To ease pressures to revalue its currency resulting from its bulging foreign exchange reserves, China injected US$45 billion from its forex reserves into two debt-ridden state-owned commercial banks at the end of last year.
China's forex reserves, the world's second largest after Japan's, rose to a record US$403.25 billion at the end of last year, a rise of US$116.84 billion from a year earlier, according to the State Administration of Foreign Exchange.
(quoted from http://english.eastday.com/epublish/gb/paper1/1173/class000100022/hwz1 80789.htm) |
_________________
Principal, XLNTE. Experience Excellence.
ben@xlnte.com.
|
|
 
  |
|
smurfette
PopStar
Joined: Nov 07, 2003
Posts: 1287
Location: smurf village
|
| Posted:
Feb 10, 2004 - 11:03 AM |
|
|
Yesterday , I felt like being fooled  , for , firstly I saw the above article , then the following one :
http://english.peopledaily.com.cn/200402/09/eng20040209_134323.shtml
Central bank denies rumors of RMB revaluation
China has no specific plans or timetable to reform its foreign exchange system, a central bank spokesman said on Feb. 9, denying a weekend report that the value of the Chinese yuan will be raised by 5 percent in March.
China has no specific plans or timetable to reform its foreign exchange system, a central bank spokesman said on Feb. 9, denying a weekend report that the value of the Chinese yuan will be raised by 5 percent in March.
China Business Post reported Saturday that the yuan will be revalued next month. The central bank, or People's Bank of China, denied any such plans.
"This is the newspaper's opinion, it isn't a central bank decision," the spokesman for the People's Bank of China told Dow Jones Newswires.
"Currently the bank has no specific plans for renminbi changes. There is no timetable for renminbi reform,'' said the official, speaking on condition of anonymity. Renminbi, Chinese for "people's money," is another name for the yuan.
China Business Post cited unnamed senior bankers Saturday, saying if the central bank decides to revalue the currency, it would probably happen next month.
After a 5 percent revaluation, one US dollar would buy 7.887 yuan, compared with 8.277 at the current exchange rate, the newspaper added.
The story said the value of the Chinese currency could rise by a further 5 percent in 2005.
Renminbi is pegged at about 8.28 yuan per U.S. dollar. The current trading regime allows the yuan's value to fluctuate by 0.3 percent from its peg.
The People's Bank of China said in December that the country would keep a basically stable exchange rate as part of its monetary policy.
Zhou Xiaochuan, governor of the Chinese central bank, also said in January that China is under less pressure to revalue the renminbi than it was early last year as its trade surplus with the rest of the world is growing at a slower rate than in the past.
Many foreign economists have, however, speculated that China would revalue its currency sometime this year. Goldman Sachs Group Inc said in a recent report that it expects an initial one-off renminbi revaluation of 2.5 percent against the US dollar in the first quarter of 2004.
The company also said it expects China to peg the renminbi to a basket of currencies instead of linking it directly to the greenback.
Source: China Daily/Agencies |
|
|
|
|
|
plsteps
Newbie
Joined: Feb 10, 2004
Posts: 9
Location: Shanghai
Status: Offline
|
| Posted:
Feb 15, 2004 - 01:59 AM |
|
| Post subject: Not clear yet |
When to and how much to raise are the questions to the Chinese monetary policy makers. It is my disbelief that they have done their homework sufficiently enough to make up their mind.
Wall Street Journal’s recent article reads more conservatively the minds of the Chinese top leaders.
----------------------------
China Rethinks The Peg Tying Yuan and Dollar
Outside Pressure to Delink, Beijing's Fears of Losing
Control Prod Possible Shift
By CHARLES HUTZLER
Staff Reporter of THE WALL STREET JOURNAL
BEIJING -- Pressures building within China's hard-charging economy are driving Beijing to re-examine the Chinese currency's iron-like tether to the U.S. dollar, with a loosening looking more and more like a matter of when, not if.
The U.S., the European Union and other trading partners have urged China to let the yuan float, contending that the currency is undervalued and fueling a predatory export boom. But it is internal economic concerns -- not outside political pressures -- that are occupying Chinese leaders' minds. The financial system is awash with money. The amount of cash and private deposits surged 20% last year, twice the rate of the torrid economy. With so much money around, banks are lending at a similarly brisk pace. Inflation, dormant for most of last year, has picked up, and in December it rose 6% over the previous month.
"The monetary authorities are losing control of the economy," says Hong Liang, China economist for Goldman Sachs & Co. in Hong Kong.
The communist leadership, which prizes control above almost everything else, is signaling that the current situation may be untenable and that it is weighing its options. Premier Wen Jiabao told a high-level meeting of economic officials in Beijing this week that the government will "maintain the basic stability of the yuan," with an emphasis on the qualifier "basic." Mr. Wen also said the government intended "to gradually perfect" the exchange-rate mechanism.
A change in the yuan's value would be the biggest shift in monetary policy in a decade. In the most recent major change, China abolished a two-track system -- with different exchange rates for foreigners with hard currency and Chinese -- while placing the yuan in a narrow trading band, or desirable range of values in relation to the dollar. Mr. Wen's comments are particularly significant because, unlike the independent central banks in most developed economies, the People's Bank of China serves more as an authoritative policy body. The political leadership oversees major decisions.
DOW JONES REPRINTSThis copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers, use the Order Reprints tool at the bottom of any article or visit: www.djreprints.com. • See a sample reprint in PDF format • Order a reprint of this article now.
Options Narrowed
In grappling with the unintended effects of rapid economic growth, China's central bank is seeing its options narrowed by the current dollar peg of the yuan, Chinese officials and economists say. To maintain the peg and keep the yuan falling in tandem with the declining dollar, the People's Bank of China mounts costly money-market interventions, buying dollars from commercial banks, replacing them with yuan and then issuing to the banks short-term bills to sop up the money in circulation.
These purges of foreign currency from the system, known as sterilizations, often occur twice a week. Yet they can barely keep pace with a flood of foreign exchange that swelled reserves last year by $160 billion. A sizable chunk of that inflow comes from Chinese individuals and companies bringing home offshore money to invest in the robust domestic economy or to speculate on a rise in the yuan.
Now with money and credit still growing and inflation creeping up, the central bank finds itself in a bind over a major lever of control: interest rates. If rates aren't raised, the state's ability to contain inflation and keep the economy from overheating will be hampered. But raising deposit rates would widen a gap that already exists with lower U.S. interest rates, encouraging more inflows and increasing pressure on the yuan, economists say.
'Win-Win'
"It's being described as a win-win" for speculators, says a foreign-banking expert in Beijing: Those holding yuan deposits would reap gains with an interest-rate increase or with a revaluation.
Chinese monetary officials and political leaders are trying to discourage talk of a revaluation. They have issued repeated denials of a pending change. And Beijing has good reasons to stand pat. The peg has served China well, providing stability for an economy well enmeshed with the global-trading system. For similar reasons, many multinational companies and investors -- an important constituency for China -- favor the peg. Economist Stephen Roach of Morgan Stanley told Premier Wen in December that China should hold firm, noting that the country's slight overall trade surplus was evidence of a fairly valued currency, participants in the meeting say.
If China did move toward loosening the peg, however, any alteration would probably be incremental and would likely be followed by other Asian economies adjusting the value of their currencies against the dollar in step with China. Because any adjustment is likely to be small, the impact on the U.S. trade deficit with China -- estimated to have reached $120 billion last year -- and on American employment is likely to be minimal, economists say.
"Reforms in China have always been gradual, and without a change in the political system, there's no reason to think that reforming the exchange rate will be otherwise," says a Chinese official familiar with the internal government debate.
Hot reading among officials at the central bank and other agencies is a 28-year-old essay by Rudiger Dornbusch. The late Massachusetts Institute of Technology economist argued that governments with currencies under pressure often adjust exchange rates too radically. The People's Bank's monetary-policy committee -- an advisory panel of leading economists from officialdom and government think tanks -- has mulled an array of options, with no emerging consensus. "Who can tell me what the proper exchange rate should be?" says Li Yang, a committee member and director of the Institute of Finance and Banking.
Among the options under consideration, according to Mr. Li and other officials and advisers, are widening the trading band or revaluing the yuan, not just against the dollar but against a basket of the currencies of major trading partners and investors. Either move is likely to be accompanied initially by modestly revaluing the yuan, say between 3% and 6%, against the dollar.
Combination Possible
The debate seems to be tilting in favor of the basket approach, though some combination of all three -- a repegging, followed by a widening of the trading band and then a slow adoption of a currency basket -- also is possible. Critics of the trading band say current speculative pressure would quickly push the yuan to the top of the band, rendering the move meaningless. A basket, proponents argue, would give China more flexibility, allowing it to alter the mix and stabilize the yuan's value. Singapore and India, for example, manage their exchange rates with baskets, though their models differ.
When China is likely to move, however, is more difficult to predict. Chinese officials have said changes to the fragile banking system now under way top the financial agenda this year, not monetary overhaul. Given that the leadership never likes to be seen bowing to pressure, the government might wait for speculation to ease off.
Yet China might not have the convenience of choosing its time to revalue. Signs abound that China no longer has the administrative power nor the finely tuned policy controls to sway the banks and individuals who are funneling yuan into the economy and feeding the boom in credit. For half a year, alarms have been sounded about speculative bubbles in real estate and supplier industries such as steel and cement. New regulations and directives from the People's Bank to slow lending, however, worked only temporarily, with credit growth roaring back during the past few months, economists say.
Write to Charles Hutzler at charles.hutzler@wsj.com1
URL for this article:
http://online.wsj.com/article/0,,SB107661385410828492,00.html
Hyperlinks in this Article:
(1) mailto:charles.hutzler@wsj.com
Updated February 13, 2004 3:18 a.m. |
|
|
|
|
|
|
| |
|
|
Forum FAQ
Search
Preferences
Watched Topics
Log in to check your private messages
Log in
