RMB expected to rise 1-2% against the greenback in '14
By Kathryn Chiu, The China Post
January 22, 2014, 12:13 am TWN
TAIPEI, Taiwan -- An HSBC economist on Tuesday said he sees China's 2014 gross domestic product (GDP) to remain at 7.5 percent while the renminbi (RMB) to appreciate 1-2 percent, breaching US$6 in exchange for the greenback.
HSBC China's Chief Economist Qu Hongbin said that China's annual economic work conference which closed in late 2013 pledged to implement financial, taxation and other reforms while mainaining the positive trend of growth in 2014.
This implies that next year's growth target will likely remain at around 7.5 percent, the same as in 2013, Qu said.
Beijing's top leader said that “reform” and “steady growth” are consistent with each other. Qu accordingly expected Beijing to maintain the current policy stance to keep growth within its comfort zone. GDP growth rate and consumer price index (CPI) target for 2014 are mostly likely to remain unchanged from last year, which is 7.5 percent for GDP and 3.5 percent for CPI.
On the RMB exchange rate front, the Communist Party of China's (CPC) third plenary session has set as mid-term policy goal full convertibility of RMB and liberalization of interest rate. Qu expected to see the realization of the policy goal in the course of 2-3 years.
Qu added that he expects the pace of RMB appreciation to slow down given that the U.S. Federal Reserve (Fed) has announced a cutback on its bond-buying program, thus scaling back an influx of foreign funds into China. He expects RMB to appreciate only 1-2 percent in 2014.
The People's Bank of China in late 2013 raised the reference rate for the RMB in exchange for the greenback to 6.1, which is a new high since the country's exchange rate reform in 2005.
Data shows that the RMB reference has set new records 41 times throughout 2013, up by 1984 basis points in total against the U.S. dollar, which is nearly three times the figure seen in 2012.