The renminbi’s recent devaluation will help promote long-term stability of the Chinese economy and improve the nation’s international balance of payments situation, according to Hong Kong’s Financial Secretary John Tsang.
The currency depreciation will give to a fillip to Chinese exports in the short term, Tsang wrote on his blog.
As for Hong Kong, inflationary pressures could ease due to a weaker Chinese currency, the finance chief wrote.
However, volatility in the exchange rates of emerging market currencies may lead to some turbulence in asset prices, Tsang warned, according to the Hong Kong Economic Journal.
This is especially the case as the economic prospects of emerging markets remain uncertain and there may be some reversal in global capital flow trends, Tsang said.
While a weaker currency will help China in the short term, wider discrepancy in the daily mid-point rate of the renminbi as compared with the market rate, should a fixed-rate regime continue, could bring some problems and be detrimental to the country as a whole, Tsang said.
In other comments, Tsang touched upon the concerns over a delay in the inclusion of the renminbi into the Special Drawing Rights basket of the International Monetary Fund.
The RMB’s inclusion in the IMF’s reserve currency basket will be a gradual process, depending on the pace of the country’s financial reform and alignment to international markets, he said.
- Contact us at [email protected]