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China’s Latest Currency Actions Are Market Driven
by Nicholas R. Lardy | August 11th, 2015 | http://blogs.piie.com/china/?
China’s
central bank took a potentially major step toward a more
market-determined exchange rate on August 11, when it announced a
revision in the process for fixing the central parity exchange rate, the
starting point for daily trading of the renminbi (RMB) in the onshore
market.
While the reform has set off alarm bells
in some quarters, it is unlikely that this move will usher in another
chapter of currency manipulation to support Chinese exports and thus its
economic growth. China may well be concerned about an economic slowdown
accompanied by a slump in exports, but its motivation for this move is
almost certainly tied to another objective: China’s aspiration to have
the RMB join the four other major international currencies (the dollar,
the euro, the pound sterling, and the yen) that comprise the so-called
special drawing rights (SDR) basket of the International Monetary Fund
(IMF). The IMF executive board will decide in November whether to
include the RMB in that basket.http://blogs.piie.com/china/?p=4465
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