Factors of Appreciation of RMB
The RMB is appreciating against the U.S. dollar .RMB value increase has been one of the popular issues in the recent year. There are several reasons that cause the RMB to appreciate.
Rising inflation
Rising inflation has further complicated the issue, because a rise in the value of the RMB can to an extent reduce inflationary pressures. The main gauge of inflation rose by an average 8.1 percent in the first five months of 2008. As the spillover from the recent rise in energy and electricity prices surfaces, inflationary pressure may become heavier.
China's foreign exchange reserves are too high
Before the reform and opening up, China's foreign exchange reserves have been few, to 1978, only 1.6 billion dollars of foreign exchange reserves; until after the reform and opening up, China's RMB exchange rate adjustment on several occasions, the promotion of foreign trade, increasing foreign exchange reserves, with the foreign trade system reform .In-depth and rapid growth of exports, to reach large-scale inflow of foreign capital. Under the balance of payments view, appreciation of the RMB is a must.
Political pressure
The US and China are in dispute over a number of issues, in particular Beijing's currency policy. The disputes have been exacerbated by the widening US trade deficit with China. US always blamed that the unevaluated RMB is the cause of huge trade deficit. This is why the United States urges China government to revaluate the renminbi.
The positive impacts of RMB appreciation to China
Cheaper Imports
China imports technologies, petroleum, metals, machinery and skills from other countries. China is the largest consumer of many commodities such as aluminum, steel, coal and copper and second largest consumer of oil. With the increasing prices of these commodities, appreciating RMB will put less pressure.
Accelerating industrial upgrading
An revaluation of the RMB can help bring some structural adjustments...