On 1 September 2015, the Daily Telegraph published a letter by Mr. Zhang Yangwu, Spokesman of the Chinese Embassy in the UK, on China's economy and the reform of the quotation of the central parity of the RMB . The full text is as follows:
SIR - With regard to your recent articles on the Chinese economy, I wish to make a few points. The reform of the quotation of the central parity of the RMB against the US dollar was an adjustment aimed at improving the market-based mechanism of forming exchange-rate.
The depreciation of the yuan was not a result of government regulation but rather a self-adjustment of market forces. The Chinese yuan has been under the pressure of excessive appreciation against a basket of currencies. The latest fluctuation of the RMB central parity was against the US dollar. A two-way fluctuation of the RMB should be the norm. China is more of a major manufacturing powerhouse than a financial hub. The RMB is not yet an international reserve currency. The international knock-on effects of a change in value of the RMB are nothing like as much as those of a change in value of the US dollar.
China's economy has maintained relatively fast and steady growth. China has sufficient foreign exchange reserves and numerous tools at hand for economic regulation. The Chinese Yuan will remain basically stable at a reasonable and balanced level with no foundation for long-term depreciation.
The main driving force for China's economy is domestic consumption. Given the current level of domestic demand there is no need to prop up growth by stimulating exports through currency depreciation. China has never introduced quantitative easing to induce currency depreciation.
Sustained economic growth is China's biggest contribution and primary responsibility to neighboring countries as well as to the world economy. Only market-based reforms will help China adapt to the new normality of its domestic economy and maintain financial stability. Only then will China make more contribution to the growth of the world economy by increasing imports and overseas investment.
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