Safe Officials Refute Worries About Weakening Renminbi

Wang Yungui, director general of the comprehensive administration of the State Administration of foreign exchange, at a news conference on Thursday, downplayed concerns about the weakening of the renminbi and capital outflows, saying that the yuan remained strong and capital flows into China rather than outflows.

Wang Yungui said there was no capital outflow at present. He said there was a net outflow of cross-border revenue and expenditure between August and December last year, but now it is a net inflow.

Wang Yungui said at a news conference that the problem facing the renminbi is that exporters hold more. Foreign exchange earnings 。 He said that in the first two months of this year, foreign exchange deposits of enterprises and individuals in Chinese banks increased by US $63 billion 900 million over the same period last year.

　　 Wang Yun Gu It said that the renminbi was pressurized against the US dollar but still strong against other currencies such as the euro. RMB It rose nearly 11% against the euro.

Oliver Barron, an analyst at North Square Blue Oak, an institutional broker, says whether this is all the situation is doubtful. He added that the high trade surplus and stable foreign investment should mean that more foreign exchange will be converted into Renminbi.

The problem has not yet reached the alarming level. Analysts said that as of the end of 12 last year, China's foreign exchange reserves amounted to $3 trillion and 840 billion, which could withstand a slight contraction.

Zhu Haibin, an economist at J.P. Morgan Chase & Co., said that regulators now pay attention to the problem of capital outflow but are not worried about it. Morgan said However, if the capital outflow is aggravated, surpassing the trade surplus, resulting in a sharp decrease in foreign exchange reserves, the problem will become even more serious.

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On the morning of Friday (March 27th), Barclays analyst Jose Wynne and others said in a quarterly bulletin issued on the 26 day that when the US dollar was strong, China would allow the US dollar to be on the shore in order to avoid a substantial rise in the real effective exchange rate (REER) of the RMB.

The Barclays report pointed out that the recent situation shows that China's need to maintain a strong currency, especially the strong trade weighted exchange rate, has been reduced. Inflation is not a worry, and the risk of deflation is rising. Research shows that the exchange rate has an important impact on China's inflation rate.

The bank's report continues to point out that the overvaluation of the RMB exchange rate is extremely serious, and the bank's model estimates that the RMB is overvalued by about 20%.

The report believes that China's intervention in the exchange rate to curb the depreciation of the renminbi will weaken the effect of liquidity easing policy. The recent rise in the REER of the renminbi may drag China's exports to other countries outside the United States.

In addition, China's official statement shows that it is not worried about capital outflows.

Barclays report finally said that the US dollar should be estimated at 6.40 at the end of 2015.