RMB exchange rate analysis and forecast
——Dr. Xiao Lisheng from Institute of World Economics and Politics (IWEP)

Firstly, Mr. Xiao concluded three structural changes of world economy. (1). The growth of world economy declines and that of emerging markets stalls. (2). Global trading shrinks, showing the trend of deglobalisation. (3). Interest rate is moving down and it is expected to keep low in the long term. 

Secondly, he pointed out the importance of RMB exchange rate reform. After the exchange rate reform on Aug 11, 2015, RMB devaluation expectation has witnessed periodical changes. The cost of central bank鈥檚 intervention was relatively high. 1% devaluation needs 60 billion USD averagely. Capital flow is cause, currency devaluation is result. Capital outflow has brought RMB underselling in foreign exchange market, arousing expectation of devaluation, posing bigger pressure on capital outflow in turn. 

Thirdly, Dr. Xiao estimated that how much RMB will further depreciate. RMB is expected to keep stable and have room for further appreciation in medium-to-long term, but it still has overshooting risk in short term. Meaning of referring to a basket of currencies: if the exchange rate between euro and U.S. dollar waves around 1.05-1.06, then the exchange rate of RMB against U.S. dollar could be around 6.5-6.9. 

Finally, Dr. Xiao indicated the direction of RMB exchange rate reform. Firstly, to enhance capital control to avoid over-fluctuation caused by speculation in offshore market. Secondly, to reference a basket of currencies to remove foreign exchange rate intervene gradually. Thirdly, to make crisis plan and lead market anticipation.