Chinanews, Hong Kong, Jan. 20 – Recently, the rate of appreciation for Renminbi seems to accelerate. In spite of this, an economist predicts that in order to protect Chinese export trade so that it won’t be severely affected by such appreciation, Renminbi’s value won’t go very high this year. He says that Renminbi’s appreciation rate will be kept below 5% this year.
In 2007, Renminbi has appreciated at an even faster rate than last year. On January 18, the central parity rate of Renminbi to US dollar reached 7.7785, hitting a record low point for four consecutive days. Based on this rate, Renminbi has appreciated by an accumulation of 4.3 percentage points now.
Qu Hongbin, chief China economist at HSBC, said that since the latter half of the last year, Renminbi’s appreciation value quickened. As a result, the rate of growth for the export will be reduced from 30% in 2006 to 15% in 2007. In order to reduce the adverse effects of Renminbi on export, Qu predicts that Renminbi will appreciate by less than 5% this year, which is within what China can sustain. He also predicts that Chinese economic growth rate for this year will be at 9%.
In 2007, the growth of global economy will slow down. However, Chinese economy will not take a hard landing, Qu said. Although Chinese export trade will slow down, and Chinese manufacturing industry will be adversely affected, Qu is still optimistic about Chinese economy this year, saying that investment will remain high as demanded for China’s infrastructure building. Meanwhile, China’s banking system will make further improvement. As many young people from countryside will settle down in big cities, consumption will be expanded. Besides, the central government can apply a set of macrocontrol measures to adjust the economy. All these positive factors will offset the negative factors, Qu said.
Recently, the central government allows mainland financial institution to issue Renminbi bonds in Hong Kong. Qu said that the measures would increase business opportunities to companies in Hong Kong and would help Renminbi savings to flow back orderly to the mainland. He said the measures would not directly affect Renminbi’s exchange rate.
He also predicted that the People’s Bank of China would raise the bank deposit reserve ratio three times this year. However, it won’t raise the interest rate.
