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May 29, 2017

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RMB to appreciate no more than 4% against US dollar

Appreciation Likely to Continue

The RMB is expected to continue tracking the upward trend so as to further push forward the internationalization of the currency. There is a long way to go for the yuan to become a global foreign reserve currency as the U.S. dollar, euro and Japanese yen remain world's top three reserve currencies.

The central bank is likely to keep the RMB value rising properly to prevent the inflation risk from coming back. The domestic inflation situation is facing many uncertainties as the European Central Bank and many European countries have launched massive bailouts to inject liquidity into the weakening eurozone economy, and meanwhile, some emerging economies are entering the path of interest rate reduction so as to boost their growth amid the eurozone crisis.

As for worries that the appreciation of the RMB may harm China's exports, it is found that the economic slowdown in the United States and the Europe, the main exporting destinations of China, is the main reason for exports downslide instead of RMB appreciation. The exports to the Europe, the United States and Japan have made up over 40 percent of China's exports at present.

RMB Expected to Rise at Most 4% in 2012

The RMB exchange rate against the U.S. dollar is expected to continue to go up in 2012 but the speed will slow down to no more than 4 percent, as the U.S. dollar index is estimated to keep strengthening under the expectation that the Federal Reserve is not likely to kick off the QE3, as well as the lack of optimism for the eurozone.

In this case, the real effective exchange rate index of the RMB is predicted to top 110 in 2012, driving down the inflation by 0.5 percentage points to 0.8 percentage points.

China's foreign trade is expected to see deficits this year due directly to worsened overseas conditions while the impact from the RMB appreciation may be neglected.

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