RMB: Cor­rect­ing im­bal­ances

China Daily (Canada) - - FRONT PAGE -

“Mea­sures es­pe­cially on the ex­change rate and in­ter­est rate that are ac­cepted by the global mar­ket would help China cor­rect im­bal­ances,” he said.

Orlik, how­ever, said he was not par­tic­u­larly im­pressed with first quar­ter growth be­ing dis­ap­point­ing and April see­ing a con­tin­ued slide while May is the start of lack­lus­ter sec­ondquar­ter growth in China

“What has been driv­ing Chi­nese growth has been real es­tate and ex­ports and nei­ther are do­ing well with real es­tate sec­tor be­ing in an over­ca­pac­ity sit­u­a­tion, hit by slug­gish sales … com­mod­ity prices are not that good ei­ther,” he said.

Con­sumer de­mand for things like fur­ni­ture had been af­fected by the un­der­val­ued yuan in the last decade, but the cur­rency has been sta­ble against the dollar, up by 13 per cent re­cently and had dealt a blow to Chi­nese ex­ports, which had con­tracted as a re­sult, ac­cord­ing to Orlik. “The ex­change rate is bad news for ex­ports,” he said.

In the last three months, China had stepped on the stim­u­lus pedal to sup­port growth, with lower in­ter­est rates and tighter mon­e­tary con­di­tions be­ing put in place, and in­fla­tion has been low but the cost of credit has been quite high, Orlik said.

“Should China en­gi­neer the de­pre­ci­a­tion of the yuan? There are temp­ta­tions but China would not suc­cumb to do­ing it and is op­posed to yuan de­pre­ci­a­tion,” he noted.

China’s Pre­mier Li Ke­qiang has ruled out cur­rency de­pre­ci­a­tion, say­ing it is not in China’s in­ter­est.

Janet Ecker, pres­i­dent and CEO of Toronto Fi­nan­cial Ser­vices Al­liance, who is a for­mer On­tario fi­nance min­is­ter, said at the event the new RMB hub is a win-win sit­u­a­tion for all, in­clud­ing banks, busi­nesses, in­dus­tries and the Gov­ern­ment.

“We are the sec­ond-largest trad­ing part­ner of China and the hub will fa­cil­i­tate trade and in­vest­ments,” she said.

Last year, On­tario Pre­mier Kath­leen Wynne led a trade mission to China, and at­tracted $966 mil­lion in new in­vest­ments by Chi­nese com­pa­nies, which would cre­ate 1,800 jobs across the prov­ince.

Caro­line Owen, man­ag­ing direc­tor, head of RMB so­lu­tions at Stan­dard Char­tered Bank, said the world of RMB re­mains un­clear, liken­ing the sit­u­a­tion to the wide ex­panse of the uni­verse of gal­ax­ies where ev­ery­one knows yuan ex­ists but is dis­tant and murky.

“China wants to see a greater use of its cur­rency on a global scale with nu­mer­ous re­forms to broaden and deepen the its use through the im­ple­men­ta­tion of mea­sures like liq­uid­ity man­age­ment, pay­ments, in­vest­ments, swap agree­ments with cen­tral banks and us­ing yuan for cross bor­der pay­ments which can help move large swaps of cur­ren­cies,” she said.

Lots of Chi­nese busi­ness in the main­land are still be­ing funded in US dol­lars, said Owen as she out­lined the benefits of us­ing the ren­minbi, in­clud­ing im­prov­ing mar­gins to grow mar­ket share.

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