by Xinhua writer Sun Xiaoling
LONDON, Jan. 12 (Xinhua) -- China's currency renminbi (RMB) has strengthened more than 1000.00 basis points against the U.S. dollar in the week ending Friday, which saw the biggest weekly surge since July 2005.
U.S. dollar faces the weakest start over 15 years, British pound cries out for certainty, while China's yuan rules the majority, said Jeremy Cook, chief economist and head of currency strategy of international payments company WorldFirst, noting that "a stronger yuan is a good thing."
In the short term the stronger yuan is more of a help for the Chinese economy than a weaker one, he said.
"Exports may be hurt slightly but a more valuable yuan insulates against outflows from the wider Chinese economy into other assets," said Cook.
Iris Pang, Greater China analyst of Dutch bank ING, told Xinhua that the Chinese currency was being driven higher by the weakening dollar. "If the dollar continues going down, RMB will keep rising," she said.
The capital market games seemed to have changed gradually since the beginning of 2019, not just in the currency field, but also in the stocks market, experts have observed.
China's central bank People's Bank of China (PBOC) announced on Jan. 4 that it will cut reserve requirement ratios by 100 bps. The move rallied China's stocks immediately as Shanghai Composite Index closed 2.05 percent higher on that day.
Great results of Chinese shares fueled European main stocks players as British FTSE 100 Index was up 2.16 percent, French CAC 40 and German Frankfort DAX soared 2.72 percent and 3.37 percent respectively.
U.S. NASDAQ index then closed 4.26 percent higher, and Standard & Poor's 500 up 3.43 percent.
Mark Carney, the governor of the Bank of England, said Wednesday at the Future Forum that China's renminbi is likely to become a global reserve currency other than the USD, but it need take the time.
"As the world reorders, disconnections between the real and financial are likely to reduce, and in the process other reserve currencies may emerge," Carney said.
"In the first instance, I would expect these will be existing national currencies, for example the RMB," he said.
Franziska Ohnsorge, manager of World Bank's Development Prospects Group and the lead author of World Bank's Global Economic Prospects (GEP) report, labeled China's growth in 2018 and its prospects in 2019 as "very strong."
"We expect a slowdown in growth and we have revised down our forecast a little bit," Ohnsorge told Xinhua on Monday. "But policy makers have responded, of course, by using policy stimulus -- and that has been quite effective, and they have managed to really keep growth very strong."
Ohnsorge said China had well managed to continue growing over the past years. "With China there is a long standing issue which the authorities are juggling with, how to contain financial market vulnerabilities."
"So with every stimulus that has been introduced there has been a balancing act, they want to support growth but at the same time contain financial risk -- in that sense our view has not changed much to China or the main drivers of economic growth," Ohnsorge said.
Between the end of 2018 and the start of 2019, China introduced a series of comprehensive measures to further promote reform and opening up, including loosening limits on foreign investment, cutting tax on a larger scale and encouraging innovations, which demonstrated the determination of the policy makers to realize high-quality economic growth.
Therefore, whatever the currency hike or stocks surge recently, it reflected the world market's confidence in and expectation of China's continuous growth, experts said.