Analysis of RMB Exchange Rate and Expected Trends

The distinctive traits of the RMB exchange rate in 2006 are as follows: the elasticity of the exchange rate was strengthened obviously, the two-way floating band was expanded, RMB appreciated modestly and the exchange rate of RMB remained fundamentally stable during the whole year. We should adopt correct perspectives towards RMB appreciation. The enhancement of china's economic power is the profound reason of the RMB appreciation, and the tendency of the U.S. dollar exchange rate becomes the direct reason of the short-time fluctuation of the RMB exchange rate. The fluctuation of exchange rate and RMB appreciation didn't exceed the bearing capabilities of the financial systems and enterprises. Under the premise that the exchange rate policies of RMB will maintain stable in 2007, the target of our exchange rate policies is to weaken till eliminate the irrational anticipation of RMB appreciation, the contents are the exchange rate policies being the core of the monetary policies, adopting proper policies portfolios, adjusting exchange rate levels at the appropriate moment , and developing the foreign exchange market. On the whole, we estimate that the RMB floating band will be widened and the RMB will appreciate by small paces during two-way fluctuation in 2007.