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Thread: What if RMB depreciates?

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[quote=GUESTYUAN,273613]Since the foreign exchange rate reform policy was adopted, RMB has been appreciating very fast. Right now, RMB’s exchange rate against dollar has reached 7.1172 : 1. But EU and US still seem to be unsatisfied with this. In their opinion, RMB should keep appreciating faster. However, should RMB appreciate? What does China benefit from RMB appreciation?

A person suggested in his article that RMB should depreciate instead of appreciating. In his view, China hasn’t benefited much from RMB appreciation. On contrary, it has brought huge losses. The following is his argument:

First, RMB appreciation is bad for foreign exchange reserve. At present, China holds 1.53 trillion dollars foreign exchange. If RMB continues to appreciate, the foreign exchange reserve will decline. With RMB appreciating by 1 percent, China will lose about 100 billion yuan.

Second, Chinese export companies face harsh challenges with US economy declining. The cost increases but the demand decreases. RMB appreciation seems to add fuel to the fire. Especially, those small and medium-sized export companies suffer a big blow from it.

Third, RMB appreciation escalates the inflation in China. With RMB appreciating, more hot money from abroad is transferred to China and then excess liquidity is caused. Finally, inflation occurs.

What do you think of his argument, reasonable or not? Do you agree that RMB should depreciate? 
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