HSBC's head favors RMB's gradual change

Hongkong and Shanghai Banking Corporation Limited (HSBC) Chairman Vincent H.C. Cheng said Wednesday that China's currency should maintain a gradual change considering the unprecedented transformation the country is undergoing.

The country's gradual change of currency policy with an emphasis on monetary and economic stability is in the interests of both China and the global economy, Cheng said in a lecture during a conference held in New York concerning China's financial markets.

Much of the negative sentiment towards China's currency policy is based on misunderstanding, Cheng said, referring to the existence of US trade deficits with China since the mid-1970s.

There is no relation between the value of China's currency, the Renminbi (RMB), or the people's money, and the US deficits, he said.

Such deficits are actually a reflection of "long-term trends in the development of global trade and the structure of the US economy" rather than the value of the RMB, he said.

Close to 60 percent of the exports from China to the United States are produced by companies in China that are, in whole or in part, foreign-owned, said the bank's chief.

Simple math confirms that the US trade imbalance is not a result of some unseen currency manipulation in Beijing, but largely due to US companies, he said.

Considering China's unprecedented transformation both in terms of scale and complexity, its currency policy should maintain a gradual change with an emphasis on monetary and economic stability, he said.

Cheng warned increased pressure to prematurely open itself a free-floating currency will only complicate the situation even further.

Established in Hong Kong and Shanghai in 1865, the HSBC is the founding member of the HSBC Group, one of the world's largest banking and financial services organizations.

Source: Xinhua