Wording Change Signaled Shift in Chinese Exchange Rate

A State Council document issued on July 24, as part of a statement about import and export growth, discussed the exchange rate. A single wording change at the time was interpreted as widening the trading band. I covered it here: Currency Devaluation Coming. From my perspective, almost anything China does to increase the role of the market here will allow the yuan to drift lower.

However, as the article below points out, most of the media was focused on the word "range" (区间) as referring to the trading band, but it was actually referring specifically to the exchange rate. They were literally saying the yuan's exchange rate was about to expand. The writer points out that in March 2014, the PBOC explicitly said it was widening the trading band (浮动幅度) and did not say it was widening the currency's range.

iFeng: 人民币贬值两周前的预兆 国务院《意见》改了俩字
Second, keep the RMB exchange rate at a reasonable and balanced level basically stable. Improve the RMB exchange rate formation mechanism of the market, expand the floating range of the RMB exchange rate two-way. Further improve the level of facilitation of cross-border trade in RMB, expanding the size of the settlement. Research introduce more hedging products to help businesses avoid exchange rate risk, reduce foreign exchange losses. (People's Bank, the foreign exchange bureau)
This is why Chinese obsess over the wording of government pronouncements and you can sometimes tell a policy shift from a change in wording. For example, to know which country is on the outs with China, and which is in, check which countries name for the disputed territory is used in official statements.

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