Chinese Economy: RMB and Foreign Reserves
RMB exchange rate
Since July 21, 2005, China has reformed the RMB exchange rate mechanism and has moved into a managed floating exchange rate regime with reference to a basket of currencies.
That same day in 2005, the RMB exchange rate was adjusted to 8.11 per USD. On May 21, 2007, China then expanded the floating band of RMB against the U.S. dollar from 0.3 percent to 0.5 percent around the central parity published by the People's Bank of China on every business day. On April 16, 2012, the floating band was expanded to 1 percent. It was further expanded to 2 percent on March 17, 2014.
The current mechanism asks market makers to submit quotes for the RMB against the USD every business day to the People's Bank of China before trading hours. From these quotes, the People's Bank of China derives the central parity each day and the exchange rate is allowed to fluctuate within the floating band (+/- 2 percent around central parity at the moment). Market makers are given guidance on determining morning quotes. They should be based on the previous trading day's close, supply, demand, and the exchange rate of the basket of currencies.
Because of the modification of RMB exchange rate fixing mechanism by the People's Bank of China, the RMB exchange rate against the USD depreciated from 6.2083 on August 10, 2015, to 6.3982 on August 13, 2015. On October 3, 2017, the exchange rate of RMB against the USD stood at 6.6528.
Foreign exchange reserves
China's foreign exchange reserves reached 3.0915 trillion USD at the end of August 2017, ranked the first worldwide. China's foreign debts reached 1.4207 trillion USD by the end of 2016, of which 39 percent was medium-term or long-term debt and 61 percent was short-term debt. The debt service ratio was 6 percent in 2016.
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