Commentary On The Trend Of RMB Exchange Rate In The First Quarter: The Impact Of Accelerated Pace Of Appreciation Is Growing.

In the first quarter of 2008, the appreciation rate of RMB against the US dollar accelerated significantly, and the depreciation of the euro and yen appeared.

At the same time, the RMB exchange rate flexibility further enhanced.

According to statistics, the average daily fluctuation of the central parity of RMB against the US dollar in the first quarter is about 83 basis points, which is 62 basis points longer than the average daily volatility in 2007.

The accelerated appreciation of the RMB against the US dollar was mainly due to the depreciation of the US dollar. Since the outbreak of the US subprime crisis in September 2007, the US dollar has continued to weaken.

In the basket of currencies referenced by the RMB exchange rate, the US dollar is the most important component. The continued weakening of the US dollar makes the appreciation pressure of the RMB increase.

Although the RMB exchange rate accelerated against the US dollar in the first quarter, it depreciated by 3.74% and 8.75% against the euro and the yen respectively.

In July 21, 2005, China started the reform of the RMB exchange rate formation mechanism. The renminbi was no longer pegged to the single dollar, but adjusted with reference to a basket of currencies.

In addition to the US dollar, the EU and Japan are also our major trading partners. Therefore, the euro and yen play a decisive role in a basket of currencies.

Zhu Baoliang, deputy director of the Economic Forecasting Department of the state information center, said that considering the magnitude of the appreciation of the RMB exchange rate, we should refer to a basket of currencies so that we can have a clearer understanding of the RMB exchange rate situation.

The change of RMB exchange rate has brought far-reaching influence to China's economy.

The appreciation of the renminbi against the US dollar will suppress the profits of the main export enterprises that are denominated in US dollars.

Especially, textile, clothing and other industries with large export dependence are more affected.

Recently, Guangdong, Shandong and other foreign investment hot spots have already witnessed the phenomenon of labor-intensive export enterprises going bankrupt.

It is an objective fact that RMB appreciation brings pressure to some export enterprises. But on the whole, because of the strong industrial cluster and supporting capability in China, the coastal area has a larger space to pfer the industries to the central and western industries.

Moreover, the appreciation of RMB has obvious advantages in promoting foreign trade enterprises to accelerate the pformation of trade growth mode and focus on readjustment of product mix.

The data released by the General Administration of Customs in April 11th showed that China achieved a trade surplus of US $41 billion 418 million in the first quarter, and the import growth rate was 7.2 percentage points higher than the export growth rate. The trade surplus was significantly reduced by 5 billion US dollars over the same period last year.

The industry believes that in addition to China's foreign trade import and export policy adjustment, the impact of sub-prime mortgage crisis and other factors, the accelerated appreciation of the RMB against the US dollar is also one of the reasons for the slow growth of the trade surplus.

Because the EU and Japan are China's main export destinations and import origin respectively, the trend of RMB against the euro and yen is also worthy of attention.

Some experts pointed out that, in general, the pace of RMB appreciation should not be too fast. We should consider the affordability of our export enterprises and prevent large-scale speculation.

Especially in the context of increasing economic uncertainties at home and abroad, a stable exchange rate trend is conducive to China's economic development.