Central bank RMB comments leave room for interpretation

Chinese central bank governor Zhou Xiaochuan argued that market supply and demand should play a greater role in the valuation of China’s currency, sparking differing interpretations in the media of the likely course for renminbi appreciation. Zhou’s comments suggested that “policy makers still see room for the yuan to rise despite a surprisingly large Chinese trade deficit in February,” The Wall Street Journal reported. Meanwhile, the Financial Times reported that Zhou dodged questions as to whether the renminbi is fairly valued or will continue to appreciate, and quoted more bullish comments by deputy central bank governor Yi Gang. “This trade deficit is a positive sign that the renminbi exchange rate is close to its equilibrium level,” Yi said at the National People’s Congress in Beijing. The topic remains a sticking point for US politicians, but China’s larger-than-expected trade deficit in February has a growing number of analysts arguing that the renminbi is nearing its proper value.