Expert warns against overreacting to RMB exchange rate fluctuations

Expert warns against overreacting to RMB exchange rate fluctuations

Guan Tao, a senior researcher at the China Finance 40 Forum, advised stakeholders to stay calm and rational about regular fluctuations of the RMB exchange rate.

As the RMB to USD exchange rate experiences fluctuations, the market has focused a great deal of attention on the movement. Guan believe such fluctuations are a normal economic phenomenon caused by the law of value. The ups and downs are understandable, since China is promoting the marketization of exchange rate.

Guan also pointed out that both market pessimists and optimists tend to interpret data as supportive of their own viewpoints regardless of the truth, seeing only what they want to see. Thus, the recent changes are more about attitude toward the market than real economic disruptions.

As for Chinese citizens’ tendency to hold U.S. dollars, Guan explained that the trend of asset diversification is unstoppable given the increased incomes of Chinese people. But he also reminded investors to act with caution in order to avoid groundless anxiety and systematic financial risks.

 

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