RMB appreciation not likely to significantly impact China's oil and gas imports - experts
Shanghai. May 22. INTERFAX-CHINA - The rapid appreciation of the renminbi (RMB) after China's central bank announced that it would further reform its exchange rate policy will only have a limited impact on the country's oil and gas imports, two experts told Interfax.
Ji Yirong, a foreign exchange analyst with the Industrial and Commercial Bank of China, told Interfax that the appreciation of the RMB will certainly make oil and gas imports cheaper, but that it will not be enough to significantly impact imports. On the other hand, he noted that energy prices will rise if the country uses the appreciation to purchase more energy products.
The People's Bank of China announced on June 19 that it would "further push to reform the formation mechanism of the RMB exchange rate and increase its flexibility."
On June 21, the first workday after the PBC's announcement, the RMB's exchange rate dropped by 0.47 percent to RMB 6.798 per US dollar, coming close to reaching the daily limit of 0.5 percent as the value of the RMB hit its highest level in five years.
The PBC noted in the announcement that further reform does not mean that the RMB will be revaluated through a large one-time readjustment.
"The market is assuming that the RMB will float more actively in the coming months and continue to appreciate," said Ji.
There has been some speculation that the exchange rate will drop by 2 percent to RMB 6.676 per US dollar, Ji said.
Han Xiaoping, a senior analyst with China Energy Net, agreed with Ji and told Interfax that such a change in the exchange rate policy will not have a big impact on the country's energy imports unless the RMB appreciates greatly.
Ji also noted that the RMB's rapid appreciation is attributable to investors' worries that the international community will pressure the central government to follow through on its vow to reform the exchange rate policy at the upcoming G-20 summit in Toronto on June 26.
In 2009, China imported 204 million tons of crude oil and 5.53 million tons of liquefied natural gas.