RMB appreciation will bring disaster to Central banks, commercial banks, and China's net assets abroad will shrink by USD 220 bln should RMB appreciate, said Tang Guoxing, a professor with the Management School of the Fudan University at the South China University of Technology March 20.

In his speech named Conditions for China to Adopt Floating Exchange Rate System, Tang said RMB is facing pressures from four aspects:

-Persistent surplus in income and expenditure.

-Foreign capital's high yield in China.

-Expectations for RMB to appreciate.

-Low inflation rate in China.

According to Tang, the first two factors are most important and will exist for a long term. RMB is not able to avoid pressure from these two aspects because the two factors cannot be deminished. While the third and fourth factors are short-term.

Capital inflow into China has resulted in potential pressures for RMB to appreciate. But RMB appreciation will increase wealth, reduce burden of repaying foreign debt, and promote structural adjustment. At the same time, it lowers China's international competitiveness, and leads to shrinkage of China's capitals abroad. The central bank, commercial banks, enterprises and individual will be harmed should the RMB appreciate. China's net assets abroad will shrink by USD 220 bln.

By People's Daily Online