The RMB will not experience drastic depreciation, and the foreign exchange market will return to trading on fundamentals after a temporary shock, Pan Gongsheng, a deputy governor of the People’s Bank of China (PBoC) said Monday in a response to the US’ move to label China a currency manipulator, reported Caixin.
The resilience of China’s economy provides a sound foundation for the stability of the Chinese currency’s exchange rate, Pan said in an article published on the website of Financial News, a central bank-backed newspaper. Pan’s words come as the trade war between the world’s two largest economies has intensified since the beginning of this month, leading the RMB to weaken to an 11-year low.
The recent short-term adjustments of the RMB’s exchange rate are a “spontaneous stress response” to unexpected threats of more tariffs, said Pan, who’s also administrator of the State Administration of Foreign Exchange. “The RMB is still a strong currency,” he added.
From 2005 to June 2019, the currency’s nominal effective exchange rate appreciated 38% while its real effective exchange rate appreciated 47%, making it the currency to have appreciated the most of any of those issued by G-20 countries, the world’s 20 major economies, Pan said, citing data from international financial institution the Bank for International Settlements.