Friday, December 31, 2010
Internationalization of Renminbi-XI
One week before the G20 summit in Toronto, the Chinese central bank, People’s Bank of China announced “Further Reform the RMB Exchange Rate Regime and enhance the RMB Exchange Rate flexibility” at night of 19 June 2010. “In further proceeding with reform of the RMB exchange rate regime, continued emphasis would be placed on reflecting market supply and demand with reference to a basket of currencies. The exchange rate floating bands will remain the same as previously announced in the inter-bank foreign exchange market. China’s external trade is steadily becoming more balanced. The ratio of current account surplus to GDP, after a notable reduction in 2009, has been declining since the beginning of 2010. With the BOP account moving closer to equilibrium, the basis for large-scale appreciation of the RMB exchange rate does not exist. The People’s Bank of China will further enable market to play a fundamental role in resource allocation, promote a more balanced BOP account, maintain the RMB exchange rate basically stable at an adaptive and equilibrium level, and achieve the macroeconomic and financial stability in China (Web of the People’s Bank of China).” Many countries including US Treasury secretary Tim Geithner, French President Nicolas Sarkozy, Russian Finance Minister Alexei Kudrin, the European Commission, and Japan’ finance ministry, praised the Chinese decision regarding the flexibility of Renminbi or yuan. By September 2010, banks in Japan, such as Bank of Tokyo-Mitsubishi UFJ, Mizuho Corporate Bank, and SMBC, started services that allow Japanese companies and individuals to open yuan-denominated accounts in Japan.