Business / Economy

Rouble slump not to threaten RMB

(Xinhua) Updated: 2014-12-23 17:22

BEIJING -- The recent plunge of the Russian rouble has triggered worries of a run on emerging economies' currencies, but experts have played down the effect it will have on the renminbi.

Researcher at the Institute of Finance and Banking, under the Chinese Academy of Social Sciences, Peng Xingyun on Tuesday was upbeat that the rouble's depreciation would not weaken the Chinese currency in the long run, although he acknowledged it would have short term adverse effects.

China's economy is adapting to its "new normal", characterized by slower growth but higher quality, which, it is hoped, can provide a solid foundation for a strong currency, Peng said.

Amid China's efforts to boost the internationalization of the renminbi it will try to avoid a sharp depreciation of the currency, he said.

Drastic renminbi depreciation could cause trade-related friction between China and the United States, as China has a trade surplus against the US, Peng said.

The rouble's recent depreciation has exerted no significant impact on China and China's economy and capital flows are normal, said Wang Yungui, an official of the State Administration of Foreign Exchange last Thursday at a press conference.

The spot exchange rate of China's currency dropped below 6.21 against the US dollar last Thursday, the weakest point in almost five months.

Wang believed it to be "normal depreciation," stressing that the market was playing a more active role in pricing the yuan along with the central government's exchange rate reform measures.

Peng said the driving forces causing the rouble's depreciation did not apply to the renminbi.

Russia's economic reliance on the oil industry was exposed as fluctuations in the price of crude oil triggered the rouble's slide, Peng said.

In addition, Russia's political relationship with the United States and Europe has been strained, and this also played a role in the currency's slump, Peng said, adding that speculative market activity had aggravated the situation.

The rouble's fall against the dollar on Dec 15 was a record-low since the currency's crisis and default in 1998.

Since the beginning of this year, the Russian central bank has raised its key interest rate by 6.5 percentage points to 17 percent.

During a year-end press conference last week, President Vladimir Putin praised efforts by the central bank and the government to stabilize the currency and noted that it would take at most two years for the economy to rebound.

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