The People's Bank of China issues policy stance on the exchange rate of the Renminbi

The RMB exchange rate, as an important price in the financial market, has long been of great concern to all sectors. On the 8th, the People's Bank of China released the "Policy Position of the People's Bank of China on the Renminbi Exchange Rate" (hereinafter referred to as the "Position"), clarifying its policy position on the Renminbi exchange rate.

The Position emphasizes that China implements a managed floating exchange rate system based on market supply and demand, adjusted with reference to a basket of currencies, and insists on allowing the market to play a decisive role in the formation of exchange rates.

China's exchange rate system has the following characteristics: firstly, it insists on allowing the market to play a decisive role in the formation of exchange rates. The People's Bank of China does not preset exchange rate target levels, does not intervene in long-term exchange rate trends, and maintains exchange rate flexibility and two-way floating. The second is to focus on preventing short-term significant fluctuations in exchange rates, especially short-term sharp depreciation, from affecting financial stability. The third is to continuously enhance the transparency of exchange rate policies.

The 'Position' states that in the past 20 years, the RMB exchange rate has fluctuated in both directions; Since 2010, the RMB exchange rate has gone through multiple cycles of appreciation and depreciation, with a more pronounced two-way floating characteristic and increased elasticity.

Since the exchange rate reform in 2005, the RMB exchange rate has fluctuated in both directions and maintained overall strength among major international currencies. After 2010, the RMB exchange rate experienced alternating cycles of appreciation and depreciation, with a more pronounced two-way floating characteristic and a significant increase in exchange rate elasticity. Since 2025, the RMB exchange rate has fluctuated in both directions and appreciated in an orderly manner. Looking ahead, there are various factors that affect the RMB exchange rate, including both appreciation and depreciation drivers, and the direction of the exchange rate remains uncertain.

The "Position" emphasizes that China's trade development is rooted in the improvement of its international competitiveness in the industry. China has no need or intention to gain trade competitive advantages through exchange rate depreciation and never engages in competitive currency devaluation.

In the past, multiple rounds of RMB appreciation did not affect China's trade development, and during the depreciation period, China's export share did not increase faster. In recent years, an important structural change in China's trade has been a significant decrease in sensitivity to exchange rate fluctuations. Chinese exporters are no longer simply price takers, but are embedded in the global supply chain and can share exchange rate costs with upstream and downstream enterprises. China is a responsible major country that has never engaged in competitive currency depreciation or promoted the depreciation of the renminbi to boost imports and exports in the past, despite multiple rounds of high-intensity external shocks. The global foreign exchange market has a huge trading volume, making it difficult to continuously intervene and influence the foreign exchange market.

The Position states that the exchange rate is influenced by various factors such as economic growth, monetary policy, financial markets, geopolitics, and sudden risk events, and there is no simple linear relationship with the current account.

Analyzing exchange rate fluctuations requires not only examining goods trade, but also services trade; Not only should we look at the current account, but also the financial account; We should not only focus on economic fundamentals, but also on expectations and other factors. From the perspective of trade channels, the correlation between trade and exchange rates is gradually decreasing; From the perspective of financial accounts, significant fluctuations in exchange rates in emerging markets are often triggered by capital flows under financial accounts; From the perspective of expectations, in 2025, countries will launch a tariff war, and China will face the highest tariff threat at one point, which has affected market expectations. Although China has maintained a large current account surplus during the same period, the exchange rate is still under pressure; From a practical perspective, there is no linear relationship between the current account and the exchange rate. A current account surplus does not necessarily mean that the local currency exchange rate is undervalued and needs to appreciate, and a current account deficit does not necessarily mean that the local currency is devalued.

The 'Position' states that the international evaluation methods for the equilibrium level of exchange rates are not yet mature, and using individual evaluation conclusions as the 'official basis' for the undervaluation of the RMB exchange rate is a misinterpretation and misuse of the evaluation results.

The Position emphasizes that global economic imbalances are closely related to the evolution of global division of labor patterns, inherent contradictions in the international monetary system, and long-term high fiscal deficits and high consumption in some countries, and require joint efforts from all parties to resolve them. Simply attributing the decline in domestic industrial competitiveness, weakened financial constraints, and complex structural problems to other countries' exchange rates is a shirking and avoidance of one's own adjustment responsibility.

Major industrialized countries in history have all experienced current account surpluses. In recent decades, the major surplus countries in the world have been constantly rotating, while the major deficit countries have remained unchanged, which is related to the inherent contradictions of the international monetary system. The decline in trade competitiveness of some countries reflects their own structural difficulties. Each country should promote its own structural reforms. Deficit countries should start fiscal consolidation to improve their savings rate and industrial competitiveness; Surplus countries should promote consumption and investment growth.

The "Position" points out that China has made positive contributions to the multi round dynamic balance of the global economy. During the "15th Five Year Plan" period, China will adhere to promoting the transformation of economic growth mode, expanding domestic demand, improving the business environment, deepening high-level opening up to the outside world, and promoting the development of the global economy towards a more open, inclusive, and balanced direction.

Since the beginning of this century, the global economy has undergone multiple important dynamic equilibrium processes, in which China has been deeply involved and made positive contributions. During this process, the Chinese economy itself has also undergone profound structural adjustments and dynamic balancing. China firmly implements the strategic direction and key measures determined in the 15th Five Year Plan, insists on promoting the transformation of economic growth mode, expanding domestic demand and high-level opening up to the outside world, and contributes to the new round of global economic dynamic balance.