China's State Council, the cabinet, recently said the exchange rate formation mechanism of China's currency Renminbi, or RMB for short, should be further marketized and the floating range of RMB exchange rates should be expanded.
Investment bank China International Capital Corporation (CICC) comments that it is highly possible that China will act soon and the floating range of RMB's exchange rate against the U.S. dollar will likely be expanded to 2-3 percent within two months.
However, the CICC says China's financial market especially foreign exchange market is still immature and related risk management system is incomplete, so China is still not ready for large foreign exchange rates fluctuations or completely free float.
Moreover, the CICC says expanding the floating range now would help clear barriers for the RMB to join the special drawing rights (SDR) of the International Monetary Fund (IMF).
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