Currency

Since the beginning of 2018, the exchange rate of RMB against the U.S. dollar has fluctuated greatly. It appreciated by 3.5 percent in the first three and a half months before it depreciated by 8.7 percent after mid-April (up to August 3, the same below), and an overall depreciation by 4.7 percent in the last seven months so far.

CAIFU Editor's Note: Many people view the increase of money supply (M2) in China as a simple issuing of currency. If we look at the annual amount of trillions in high-speed rail investments, we will see that although it is manifested as an increase in M2, it also corresponds to the increase of all social wealth. Guan Tao, former director of the International Balance of Payment Department in the State Administration of Foreign Exchange, explained the issue more clearly, adopting the concept of a national balance sheet.

The world’s largest banks believe that the use of RMB as a trading, investment and reserve currency will continue to grow. By 2015, RMB trade settlement will have surged, particularly among its main trading partners. The redback’s role in global trade cycle should also be reinforced. By 2020, the RMB should be prevalent in finance and be fully convertible.