The People’s Bank of China (PBOC), on October 8, issued a detailed statement regarding its perspective on the renminbi (RMB) exchange rate, responding to international scrutiny. The central bank emphasized that China operates under a managed floating exchange rate system that relies on market supply and demand, referencing a basket of currencies.
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The PBOC highlighted that the RMB has experienced fluctuations in both directions since 2005, showing periods of appreciation and depreciation with increasing flexibility. China affirmed that it does not seek competitive advantages through currency devaluation, stating that its trade growth stems from its industrial competitiveness.
Several factors influence exchange rate dynamics, including economic growth, monetary policy, and geopolitical conditions. The central bank criticized the interpretation of certain assessments claiming RMB undervaluation, stressing that these assessments often misrepresent the complexity of exchange rates and current accounts.
The PBOC reiterated its commitment to a market-oriented reform of the RMB exchange rate since the 1990s, noting that market forces play a critical role in determining the RMB's value. The central bank has reduced market intervention since 2017, focusing on preventing excessive short-term volatility that could destabilize the financial system.
The RMB has appreciated by around 23 percent against the US dollar since the initiation of its exchange rate regime reform. Although the currency has fluctuated, it has shown resilience amidst global financial pressures. The PBOC reported that structural adjustments in China's trade, such as the shift towards high-tech exports, have reduced the sensitivity of trade to exchange rate changes.
China has refrained from using competitive currency devaluation to boost exports during crises, emphasizing its role in maintaining regional and global stability. It pointed out that trade competitiveness issues are often rooted in structural problems within deficit countries, not merely due to other countries' exchange rates.
The statement also addressed the complexities of establishing an equilibrium exchange rate, warning against relying on singular models or interpretations of data such as those from the International Monetary Fund (IMF) that may misrepresent the RMB's value.
The PBOC concluded by underscoring the necessity for collective action among countries to address global economic imbalances, stating that each nation must undertake structural reforms to enhance economic resilience. As it moves forward with its 15th Five-Year Plan, China will continue to open its economy and enhance its global economic contributions.