[Explanation] Recently, Guan Tao, chief economist of Bank of China Securities and former director of the Balance of Payments Department of the State Administration of Foreign Exchange, said in an exclusive interview with China News Service that the renminbi is increasingly becoming a mature currency—— Random walk non-linearly.
[Concurrent period] Guan Tao, Global Chief Economist, Bank of China Securities
The characteristic of the renminbi, which is increasingly becoming a mature currency, is a non-linear random walk.
There are many factors that affect the exchange rate. Sometimes the factors of appreciation dominate, and sometimes the factors of devaluation dominate. These influences tend to change and increase. If they rise too much, they will fall, and if they fall too much, they will rise.
[Explanation] How to judge the future trend of the RMB exchange rate?
In Guan Tao's view, there are multiple equilibriums in the foreign exchange market, that is, given the fundamentals, it is not possible to simply linearly determine whether the RMB will appreciate or depreciate.
[Concurrent period] Guan Tao, Global Chief Economist, Bank of China Securities
I do believe in a concept that the economy is strong and currency is strong.
This is proven by historical experience. For example, with the rise of the Japanese and German economies after World War II, the German mark and the yen have appreciated in value over a long period of time.
After the unification of the exchange rate in 1994, why did the RMB appreciate for a longer period of time? It is also a strong economy and a strong currency.
[Explanation] Guan Tao believes that in the medium and long term, if the "14th Five-Year Plan" and the 2035 long-term goal are followed to achieve a high level of opening to the outside world and achieve high-quality development, the renminbi will definitely have potential.
From a practical point of view, a managed floating exchange rate system is also an arrangement suitable for China's national conditions.
[Concurrent period] Guan Tao, Global Chief Economist, Bank of China Securities
The most prominent manifestation is that since we established the current exchange rate system in 1994, we have experienced the impact of various extreme events.
Therefore, the renminbi can rise and fall, and the two-way fluctuation of the renminbi has become a shock absorber that absorbs internal and external shocks.
Precisely because the exchange rate fluctuates, it helps to release market pressure in a timely manner and avoid the accumulation of expectations.
[Explanation] When it comes to the reform of the exchange rate mechanism, Guan Tao believes that the direction of market-oriented reform is to allow the market to play an increasing role in the formation of exchange rates.
He added that reform is a package of reforms. For example, the establishment of a modern monetary policy framework, ensuring the health of the economic and financial system, the construction of a modern enterprise system, and the transformation of economic development methods will all promote or restrict the reform of the RMB exchange rate formation mechanism.
Reporter Xia Bin, Shan Lu, Wang Chao reporting from Beijing
Editor in charge: [Sun Jingbo]