After exchange rate reform, China's trade growth sensitivity to the renminbi exchange rate has been reduced from 2 to 1.5, which is similar to calculations by the World Bank that show that the exchange rate influence on exports has been reduced. However, China's export exchange rate elasticity is still much higher than the world average of 0.6 - that is, although the influence is falling, the renminbi exchange rate depreciation could still effectively boost China's exports.

From the central bank's point of view, although foreign trade import and export data has not been good, there are still some bright spots.

One is that China's exports have been mostly steady and have seen some growth, and export companies' competitiveness has been improved. From January to September, the ratio of Chinese goods among total imports has increased in the United States, the European Union and Japan, with the US increased from 20 percent to 23 percent, and Japan from 24 percent to 28 percent. It shows that the main reason for China's export decline is the slowdown in overseas demand, not the overvaluation of China's renminbi exchange rate.

Second, the declining trade surplus has increased the US dollar supply in China. Because import growth declined faster than the export growth from January to November, China's trade surplus still reached $530 billion. This amount of dollars entered the domestic foreign exchange market, which could relieve the renminbi's depreciation pressure. It looks like the declining trade surplus could last for some time.

So although depreciation would benefit exports, the central bank doesn't plan to, or need to, use exchange rate depreciation to boost export.

Second issue: Is the central bank's intervention in the foreign exchange market sustainable?

After the Aug 11 reform, the central bank released the macro-prudential policy of forward settlement and sale exchange reserve fund, and other capital control policies including pausing the RMB qualified domestic institutional investors program. These measures are more effective than using the foreign exchange reserve to interfere, but its impact in twisting the foreign exchange market will be bigger.

The central bank isn't too concerned about reducing the foreign exchange reserves. If the decline of the foreign exchange reserve is due to domestic residents' demand to increase holdings of US dollars, it could actually reduce the government's pressure to manage the huge foreign exchange reserve.