Hot money behind rising yuan

 

 

By Zhan Yan

Speculative money lies behind the rising yuan as the relatively high interest rates in China in comparison to other countries are attractive to investors.

The Chinese currency Renminbi, or the yuan, retreated 7 basis points to 6.1818 against the U.S. dollar on Tuesday, after having gained 56 basis points to set a record high of 6.1811 on Monday of May 27, according to the China Foreign Exchange Trading System.

So far this year, the central parity of the yuan against the U.S. dollar has expanded by about 1.7 percent.

Chen Daofu, a researcher with the Development Research Center of the State Council, said the yuan’s appreciation has recently been pushed up by the wave of interest rate cuts on the global markets, the plummeting yen and expectations on the yuan to appreciate.

Central banks in the eurozone, India, Australia, the Republic of Korea, Poland and Israel cut rates in early May, amid lower-than-expected global growth and the yen’s drastic depreciation, which fueled competitive devaluation concerns.

The Chinese central bank has not followed suit yet.

Li Huiyong, an analyst with Shenyin & Wanguo Securities, said there seems to be quite a good chance that China will cut interest rates, but such a move, if taken, may hike prices including in property.

But without such a move, interest rate differentials would grow bigger between China, with its intact interest rates, and other major economies with newly cut interest rates, attracting more speculative capital into China and putting the yuan under further appreciation pressure, according to Li.

The analyst said an overall way-out for monetary controls should be to further free interest rates and foreign exchange rates.

The central bank vowed to steadily push forward market-oriented reform in its interest rates and exchange rates mechanisms in 2013, according to a statement issued on May 24.

Suspecting that arbitrage funds have entered China in the guise of trade payments, the State Administration of Foreign Exchange, China’s top forex regulator, said on May 6 that it will strengthen oversight on the operations of traders and commercial banks to fend off risks brought by illegal cross-border capital movement.

The rising yuan has posed risks for traditional sectors.

Li Youhuan, a professor at the Guangdong Academy of Social Sciences, said traditional exports, like shoes, clothes and furniture, are creaking under the soaring yuan as it cut their price advantages, but high-tech industries are more resilient under such pressures.

 

 

Share


3,680 Comments

  1. Hello there! I know this is kinda off topic but I was wondering if you knew where
    I could get a captcha plugin for my comment form? I’m
    using the same blog platform as yours and I’m having trouble
    finding one? Thanks a lot!

  2. Gonzalo wrote:

    Ridiculous story there. What occurred after? Thanks!

  3. Barbara wrote:

    Hey there! Someone in my Myspace group shared this site with us so
    I came to give it a look. I’m definitely enjoying the information. I’m bookmarking and will be tweeting this
    to my followers! Outstanding blog and wonderful design and style.

  4. Israel wrote:

    Hey! I know this is kinda off topic but I was wondering which blog
    platform are you using for this site? I’m getting sick and
    tired of WordPress because I’ve had issues with hackers
    and I’m looking at options for another platform. I would be fantastic if you could point me in the direction of a good platform.

  5. Adrian wrote:

    Excellent post. I used to be checking continuously this blog
    and I’m impressed! Very useful information particularly the last part
    :) I maintain such information much. I was looking for this certain info for a long time.
    Thanks and good luck.

  6. Alejandro wrote:

    you are actually a excellent webmaster. The site loading speed is incredible.
    It kind of feels that you’re doing any unique trick.
    Furthermore, The contents are masterpiece. you’ve performed
    a magnificent process in this matter!

  7. Elliott wrote:

    Incredible story there. What happened after? Thanks!

  8. Hi there everybody, here every person is sharing these
    experience, so it’s good to read this website, and I used to pay a quick visit
    this weblog every day.

  9. I like it when folks come together and share thoughts.
    Great blog, continue the good work!

  10. Laverne wrote:

    whoah this weblog is fantastic i love reading your articles.
    Keep up the great work! You know, a lot of persons are looking around for this info, you could help them greatly.

  11. My brother recommended I might like this blog. He was once totally right.
    This post actually made my day. You can not imagine just how a lot time I had spent for this info!
    Thanks!

  12. Wow, incredible blog layout! How long have you been blogging for?
    you make blogging look easy. The overall look
    of your web site is excellent, let alone the content!

  13. always i used to read smaller articles or reviews
    that also clear their motive, and that is also happening with this
    piece of writing which I am reading at this time.

  14. tinyurl.com wrote:

    whoah this blog is fantastic i really like studying your posts.

    Stay up the good work! You already know, lots of persons are looking round
    for this info, you could aid them greatly.

  15. tinyurl.com wrote:

    I savor, cause I discovered just what I was taking a look for.
    You have ended my 4 day lengthy hunt! God Bless you man. Have
    a nice day. Bye

  16. Welcome to Morris Heating & Cooling Inc.

  17. tinyurl.com wrote:

    Hi everybody, here every one is sharing these kinds of
    knowledge, therefore it’s pleasant to read this website, and
    I used to pay a quick visit this web site all the time.

  18. tinyurl.com wrote:

    Hmm it seems like your website ate my first comment (it was extremely long) so I guess I’ll just sum it up what I had written and say, I’m thoroughly enjoying your blog.
    I as well am an aspiring blog writer but I’m still new to everything.
    Do you have any tips and hints for beginner blog writers?
    I’d definitely appreciate it.

  19. Article writing is also a fun, if you know then you can write if not it is complex to
    write.

  20. Latisha wrote:

    Wow, fantastic blog layout! How long have you been blogging for?
    you make blogging look easy. The overall look of your web site is fantastic, let alone the content!

Leave a Reply

*