The international ratings agency Fitch predicted that the appreciation of Chinese RMB currency would slow down in the remaining months of this year; and China will face mounting pressure from the US and EU on this issue.
Pressure on exports and the intention to curtail the Yuan's speculation are two reasons supporting that prediction, according to a statement by James McCormack, managing director of Sovereign Ratings Asia Pacific, at Fitch's Global Banking Conference in Beijing on Tuesday.
He said the outlook of China's exports was not as rosy as it seemed. As the advanced economies are still playing a leading role in international trade, the US economic slowdown means less demand on one hand. On the other hand, RMB appreciation has pushed the US import prices up. This will also affect China's exports.
In addition, a steady and rapid Yuan appreciation will give foreign investors the wrong signal. "This will attract a large amount of short-term capital," said Mr. McCormack, suggesting that a clear indication by the Chinese authorities of a slower appreciation would curb the hot money inflow.
However, the pressure on China to appreciate its currency will increase if the US and EU face an economic slowdown. They will try to make the Yuan a part of the solution to their problems.
"There is no simple answer to the forex rate issue," said Mr. McCormack, adding that it depends on several factors such as exports and inflation.
By People's Daily Online
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