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To bet on appreciation of Chinese currency Renminbi is likely to pay high prices, warned a top forex official on Sunday in Beijing.
Guo Shuqing, director-general of the State Administration of Foreign Exchange (SAFE) and member of the National Committee of the Chinese People's Political Consultative Conference, said that the RMB appreciation anticipation is expected to ease this year as economies of the United States and other developed countries are showing clear signs of recovery, which would result in backflow of the US dollar and ease China's excessive supply of foreign exchange.
It is widely believed that the US Federal Reserve is likely to raise interest rates in the middle of this year and that will narrow the gap with RMB in interest rates, he said.
China has already recorded deficit in its foreign trade so far this year, the director said. Although it is hard to predict for the whole year, China's trade surplus is likely to be reduced. This, plus the rebound of inflation and the worrisome assets bubbles, would thwart the RMB appreciation anticipation.
He reminded domestic enterprises and residents of the risks involved in the fluctuation of exchange rates and told them to be on the alert against risks in order to prevent unnecessary losses.
"Betting on RMB appreciation is likely to pay enormous prices," he warned.
(Xinhua News Agency March 8, 2004)
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