China remains committed to letting market play decisive role in determining exchange rate: central bank

BEIJING, Oct. 8 (Xinhua) -- China remains committed to letting market forces play a decisive role in determining the RMB exchange rate, the country's central bank said on Thursday.

File photo shows the headquarters of the People's Bank of China in Beijing, capital of China. (Photo: Xinhua)

The People's Bank of China (PBOC) stressed in a statement outlining its view on the RMB exchange rate that the country adopts a managed floating exchange rate regime based on market supply and demand with reference to a basket of currencies.

The RMB has moved in both directions since the country's exchange rate regime reform in 2005, said the central bank.

In bilateral terms, the RMB has strengthened against the U.S. dollar from 8.27 per dollar in July 2005, when the reform was launched, to around 6.7 per dollar recently, appreciating by 23 percent cumulatively.

In multilateral terms, the RMB nominal effective exchange rate calculated by the Bank for International Settlements has appreciated by over 50 percent since the exchange rate regime reform in 2005, while its real effective exchange rate up by 35 percent, according to the PBOC.

Since 2025, the RMB has strengthened by about 9 percent against the dollar. In particular, while non-dollar currencies have weakened broadly amid surging dollar index and Treasury yields since 2026, the RMB has extended its upward trend against the dollar.

"China has no need or intent to gain competitive advantages through currency devaluation, nor has it ever resorted to competitive devaluation," said the central bank.

China's trade growth is driven by its growing industrial competitiveness in the global market, said the central bank.

Exchange rate dynamics are driven by a number of factors including economic growth, monetary policy, financial market, geopolitics and sudden shocks, the PBOC said, adding that there is no straightforward relationship between the exchange rate and the current account.

Regarding global economic imbalances, the PBOC said in the statement that they are deeply intertwined with shifting global division of labor, inherent flaws in the international monetary system, and persistently high fiscal deficits and high consumption in some countries.

Addressing global imbalances requires collective actions from all stakeholders, according to the central bank.

"Attributing one's decline in industrial competitiveness, weakened fiscal discipline, and complicated structural issues simply to others' exchange rates is nothing but shifting the responsibility for adjustment onto others and dodging accountability," said the central bank.

A number of models for assessing the equilibrium exchange rate have emerged from academic studies over the years. Noting that there is no well-established methodology for evaluating the equilibrium level of exchange rates internationally, the central bank said "therefore, citing idiosyncratic assessment findings as 'official evidence' for RMB undervaluation is a misinterpretation and misuse of those findings."

The central bank said China has long been a contributor to global economic rebalancing. During the 15th Five-Year Plan period (2026-2030), China will stay the course in transforming its economic growth model, expand domestic demand, improve the business environment, deepen high-standard opening up, and pursue a more open, inclusive and balanced global economy, the bank said.

Lu Lei, deputy governor of the PBOC, said in September that China operates a managed floating exchange rate regime, allowing market forces to play a decisive role in exchange rate determination while guarding against herd behavior and the self-reinforcing effects of irrational expectations.

In recent years, as China's export structure has undergone transformation and upgrading, companies have strengthened their pricing power and foreign exchange risk management capabilities, significantly reducing the sensitivity of China's trade to exchange rate movements, Lu said.

Meanwhile, foreign trade enterprises have increasingly used foreign exchange hedging instruments, while the RMB's share of trade settlement has continued to rise, further reducing the sensitivity of trade to exchange rate fluctuations, Lu added.

Guan Tao, chief economist at Huafu Securities, said that factors supporting both appreciation and depreciation of the RMB are currently at play.

In the short term, factors favoring a stronger RMB have the upper hand. Over the longer term, two-way fluctuations in the RMB exchange rate remain the norm, Guan noted.