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China News: RMB nears Equilibrium Exchange Rate

Some people think the 2 percent yuan appreciation cannot withstand long. Such thought has been proven unfounded, said Yi Gang, Assistant Governor of the People's Bank of China (PBC), on Oct. 27.

The Securities Association of China (SAC) organized an international symposium on the development and prospect of Asia's capital market in the 21st century. At the symposium, Yi said confidently that China's monetary authority is capable of establishing a managed floating exchange rate regime on the basis of market supply and demand, with reference to a basket of currencies, and maintaining RMB exchange rate at a reasonable and equilibrium level.

After the RMB exchange rate reform, Singapore's one-year-term RMB Non-Deliverable Forward has reflected eased pressure on further appreciation, and the margin of interest rates between China and the US will continue to widen. Under such circumstances, it can well be said that at present RMB is close to the Equilibrium Exchange Rate. The market is universally anticipating that the US Federal Reserve will see another 0.25% rise in US dollar interest rates at its next conference, thus widening the margin of RMB-USD interest rates of overnight inter-bank lending to 3.00 basis points.