Second, a rise in the medium- to long-term expected rate of inflation. The expected rate of inflation will be on an uptrend under quantitative and qualitative monetary easing and will gradually converge on the price stability target of about 2 percent. Third, an increase in import prices. Foreign exchange rate developments will put upward pressure on those prices for the time being.
At present, great pressure of appreciation on the renminbi driven by large amount of capital influx is to a large extent due to a positive outlook of China’s economy and purchase of renminbi-denominated assets by foreign companies and individuals. In fact, the money market is part of the financial infrastructure that will establish the renminbi’s role in the world.