Chinese banks given RMB exchange freedom

[TaiShang]

Chinese banks given RMB exchange freedom

China's State Administration of Foreign Exchange (SAFE) announced on Wednesday that it will allow banks to set their own exchange rates for the renminbi (RMB) against the U.S. dollar with clients, a further step in the liberalization of RMB exchange rates.

Banks can set their RMB/dollar exchange rate in their over-the-counter deals with clients on the basis of market demand, the SAFE said in a statement.


The regulation entered effect on Wednesday. Before the new move, the spreads in banks' RMB/dollar buying and selling prices were subject to regulatory controls.

The People's Bank of China (PBoC) widened the spreads to 3 percent from the previous 2 percent in March.

 

[Edison Chen]

In the past, there is only a fixed rate set by the regulatory, if i'm not wrong, 4 times a day. This is not enough, we need more flexible and market measure to handle financial problem, this is also an important step to RMB internationalization. Under the new situation, since in real world, financial data changes constantly, a small increment or a relatively slight drop could cause information asymmetry. This will help trade companies to avoid foreign exchange rate loss brought by fluctuations.

 

[cirr]

Steady as we go。

There is no need to rush anything。