China Tells

A lot of theories have been advocated to explain and predict China’s currency regulation. Out of so many various opinions, one hypothesis is particularly interesting. According to Albert Keidel, the former deputy director for the Office of East Asia Nations at the US Department of Treasury, the reason why China government seemed to have ‘re-pegged’ RMB to USD is that the basket policy has indicated to DEPRECIATE RMB (See Article from WSJ). As a matter of fact, China government has announced to peg the valuation of RMB to a basket of currency since 2007. Starting from then, RMB has appreciated against USD gradually according to the guidance of ‘basket value’. In Oct 08, however, situation started to change. USD appreciated sharply during then due to global capital’s desire to fly to safety (See Graph from Chinatells). Under that scenario, RMB should depreciate against USD based on the guidance from ‘basket policy’. However, due to political reasons, China government is aware that any depreciation of RMB against USD is likely to cause explosive reaction from Washington. Therefore as a result China government chose to keep RMB’s rate unchanged, which appears to be pegged to USD. Based on such logic, RMB is likely to be revalued according to the ‘basket guidance’ when USD continues to be depreciated to around $1.6 against EUR.

中国政府在07年宣布将人民币汇率与美元汇率脱钩，并且换成一揽子货币。从那以后人民币对美元稳步升值。但是到了08年下半年，人民币升值步伐停止，由此与美元汇率锁定于6。8左右。对于此现象美国一位经济观察家猜测由于篮子政策，人民币应当在08年对美元贬值，但是由于政治效应中国政府不想看到华盛顿反应过激，因此选择保持汇率不变。该猜测符合东方人的处事风格，有一定的可能性。