PBoC reiterates commitment to opening Chinese economy

BOFIT Viikkokatsaus / BOFIT Weekly Review 2016/07

People’s Bank of China governor Zhou Xiaochuan commented on trends in Chinese exchange rate policy in an interview with the Chinese economics journal Caixin on February 13. In Zhou’s view, China’s massive current account surplus indicates that there is no basis for yuan depreciation. He further noted that China plans to gradually shift its exchange-rate policy to a system where one of the criteria will be to establish a relatively stable yuan against a yet-to-be-decided currency basket. Zhou said that increasing international use of the yuan and the dismantling of capital controls proceeds, but that the rate of progress depends on the amount of uncertainty in the markets.

It was somewhat surprising how strongly the interview emphasized the role of speculators in the PBoC’s communication strategy, as messaging intended to influence speculative behaviour easily leads to overall confusing signalling. The views on the article on exchange-rate policy and capital movements did little to clarify the short-term outlook, but strongly suggested that China plans to stick with its opening up strategy.

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