Commerzbank’s Ganske Says Yuan Should Appreciate After Widening

Michael Ganske, head of emerging markets research at Commerzbank AG in London, comments on China widening the yuan’s trading band to 1 percent from 0.5 percent, to take effect on April 16. He also speaks about the increase in the foreign-investment quota enacted by Chinese policy makers on April 3:

Ganske sent his comments in an e-mail:

“China is targeting to liberalize the capital account sooner rather than later. All initiatives, the yuan, the latest increase of the quota, indicate that. They understand that the export-based growth model is not sustainable and that they have to strengthen domestic demand.”

“The currency should appreciate.”

“When you have a managed currency and you have a goal to move to a flexible regime, you widen the managed band.”

“As their economic growth slowed down, market participants expect a decreased speed of liberalization and I think that’s not the case. The Chinese economy is still growing with a solid pace, we are not in the hard-landing camp.”

“As the widening of the band is not significant, the short-term implication for companies should not be significant. When a currency appreciates, exports tend to become less competitive, but Chinese exports have a high import content and just 10 percent of the workforce are employed directly in export-related sectors, so the growth and social impact of a controlled, appreciating currency should be limited.”

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To contact the editor responsible for this story: Emma O’Brien at

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