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Since July 2005 launched renminbi exchange rate reform, renminbi appreciation has exceeded more than 20%. Experts believe that, although exchange rate movements on the price of a country with conduction effect, but in recent years, the reform on the actual price impact on China policy is more limited, appreciation does not mean that imported prices will ease the pressure.

Appreciation may not curb inflation.

Exchange rate policy is an effective tool to adjust the domestic price level. China’s industrial sector accounted large proportion in the country’s economic structure, as the industrial goods basically is tradable goods, currency rate appreciation or depreciation will directly affect the prices of industrial goods, exchange reform policy will affect the prices of most commodities. In addition, in recent years price fluctuation more reflected in food prices, while food prices are generally demand stable but supply instability. In the short term, food prices are more affected by raw material costs, while the later decided by commodity prices and basic commodity prices, but two prices are subject to exchange rate fluctuations.

However, the last round of price increases experience shows that China’s price level was more concerned with the domestic aggregate demand, while imported inflation on inflation was less affected. China’s CPI movements ahead of the last round of PPI, showed that transmission of external price inflation is not the major factor, depend on renminbi one-off revaluation solve imported inflation pressures is unreasonable.

Analysts pointed out that the appreciation in the theory can reduce imported inflation, but this is not renminbi appreciation power and reason, only as a result. In practice, the extent to which the currency appreciation to curb inflation is not conclusive. For example, yen in the last century long time appreciation history, 1985-1995, although yen appreciation rapidly but Japanese inflation had not a declining trend, but rose gradually. This is related with the rapid growth in Japan economic and domestic demand. This shows that whether the appreciation can ease country inflationary pressures not only depend on appreciation of the magnitude and time factors, the more important is mainly depends on the international and domestic macro economy, liquidity situation and so on.

Another expert pointed out that in the traditional economic development process, interest rate changes on the demand has greatest impact. With the Chinese economy export-oriented continuous improvement, which requires more consider on the exchange rate in the regulation of domestic demand and the rate of inflation. Exchange rate has limited impact on the second half price.

China’s exchange rate appreciations will not big, it should be about 2% -3% or so. As the central bank’s “internal balance, external balance, financial market stability,” the three goals are still very evident, coupled with the second half of our economy is in a downward trend. Under exchange rate in a very little fluctuation situation, the exchange rate on the second half of the price of China is also very limited.

China’s CPI in June rose 2.9%, lower 0.2% than the last month. Expert said at present China’s inflationary pressure has eased, but there has little relationship with the renminbi appreciation, but more is subject to the domestic credit policy, real estate regulation and other factors.

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