Five of Seven finance ministers meeting this week at China's exchange rate will not change the

    Editor's Note: October 1 will be held in Washington, seven western countries (G7) finance ministers meeting, due to Chinese Finance Minister Jin Renqing and central bank Governor Zhou Xiaochuan attended on behalf of China for the first time, but came under scrutiny. The RMB exchange rate, international oil prices and other issues will be discussed at the meeting of this important topic.
China this week for the first time formally participated in the West of Seven (G7, including the United Kingdom, France, the United States, Canada, Germany, Italy and Japan) finance ministers meeting, the RMB exchange rate will be one of the topics of this meeting, but this does not mean that with those of major industrial countries to force the Chinese government will let the yuan appreciate.
G7 over the past year has been urging China to relax the fixed exchange rate system, which in fact is to make the renminbi exchange rate regime pegged to U.S. dollar exchange rate. The United States and other countries accuse China of keeping the renminbi exchange rate artificially low, the corresponding depressed the price of Chinese exports to obtain an unfair trade advantage.
As abuzz in recent weeks, Chinese officials will attend the G7 began on October 1 a number of meetings held in Washington, so some people have speculated that China may eventually allow the yuan-dollar peg. These meetings will G7 and International Monetary Fund (IMF) and World Bank meetings held simultaneously. Long-term in overseas markets, the dollar continued to fall against the yuan's exchange rate.
But analysts generally expect, whether publicly or privately G7 what to say, the Chinese government's commitment will not exceed its long-held areas, namely, the renminbi fully convertible will one day be achieved. In fact, some experts believe that Chinese Finance Minister Jin Renqing and central bank Governor Zhou Xiaochuan attended the G7 meeting but may make the situation in China from the target of public criticism.
RMB appreciation is expected to
In September last year in the United States take the lead in the RMB under the fixed exchange rate system rife when a punitive expedition, China's senior officials in Dubai and the G7 finance ministers held an informal meeting. G7 issued a statement in the subsequent call for greater exchange rate flexibility, though not directly point the name of the yuan, but people think that's remarks against China and the other to prevent their currencies appreciate against the dollar free Asian countries.
After several months, in a non-deliverable forwards market, the dollar exchange rate continued to fall. In January of this year, the U.S. dollar forward premium in the RMB exchange rate has shown that people are expected before the end of this year rise above 6%. Since then a gradual decline in the expected appreciation of the renminbi, the U.S. dollar forward discount narrowed steadily. Dollar premium from the end of July, the market expects the RMB in the next 12 months, the appreciation rate of only 1.0%.

Two weeks ago, the dollar fell to a 5-month low, from the non-deliverable forward market of the stock market perspective, it is expected the RMB in the next 12 months will rise 3.5%.
Thus seen, the market is still expected to China in the next 12 months will be to adjust the exchange rate policy, but the current U.S. dollar forward discount is still below last year's meeting in Dubai on the eve of the level, when the level of the premium is the market China is expected to be revised reflected in exchange rate policy, and this expectation has now been shattered.
Jane Morgan Chase. Royce, said that China will guess at this G7 meeting on revaluation of the RMB exchange rate were miscalculated.
The London-based strategist wrote to clients report that JP Morgan is expected to remain moderate in the coming year the yuan appreciation, the appreciation of about 2% per quarter, although this situation before the end of 2004 or early 2005 did not large possible.
Gradual relaxation of exchange rate regime
Even if the G7 can not persuade China to relax the yuan's fixed exchange rate system quickly, it is expected that they will use some strong words to urge China to carry out economic reforms.
Deutsche Bank economist Jun Ma believes that the participants may be representative of China stated that China in the establishment of a flexible exchange rate system and progress is being made, for example, China has recently launched a foreign exchange derivatives trading, also removed some restrictions on cross-border capital flows . But China may not be committed to the establishment of a flexible exchange rate mechanism to determine a specific timetable.
In fact, G7 though have been saying that China must make more effort, but then they have sent out the signal that this week's meeting will not achieve a breakthrough.
U.S. Deputy Treasury Secretary John. Taylor last week that the Chinese banking market open to foreign investment and China's cancellation of part of restrictions on capital flows have shown that China is making progress.
Taylor said that China has established a flexible exchange rate regime will depend on the time China has all the prerequisites for speed. This statement is very similar to China's position that the exchange rate depends on the liberalization of other financial reforms, such as the removal of state-owned banking system bad debts and so on.
While the other G7 members of the sense of urgency in this matter not as good as the United States. Japan's position with the United States roughly equivalent to a senior Japanese Finance Ministry official in Tokyo on September 27, said China should be given more time to assess the economic fundamentals.
On many occasions to attend G7 meetings before the Japanese Finance Ministry official Eisuke Sakakibara said the United States urged China to relax the yuan exchange rate regime is nothing but just before the presidential election posturing.