June 19-the Central Bank announced that further deepening the exchange rate mechanism, the rapid appreciation of the Renminbi to enter channel, less than four months, overall appreciation 2.76%. This round of revaluation caused hot money inflow, surplus reduction and asset prices rise, and a series of concerns. At the same time, domestic prices rise but monthly increase, Renminbi rose further in bad posture. The reason behind this? how to respond to our special expert?.
Multiple factors lead to continuous appreciation of RMB
It is not difficult to see, including the United States, Western States this bit of RMB, not only for finding the "scapegoat" for domestic political needs, but also to curb China's economic growth, more intention make up their own competitiveness caused by insufficient balance of payments, sit back and enjoy the wealth of RMB appreciation.
Renminbi dollar recently, on the one hand, the recent dollar foreign exchange market empty feelings continue to heat up, because there are indications that a future Fed likely to further ease monetary policy to support economic; on the other hand, although China's economic growth slowed down in the near future, but in the long run is still a good investment market, international will continue to pour into hot money, increase the appreciation of the Renminbi pressure.
Appreciation too quickly will recover traumatic trade
On China, the current appreciation of speed is not optimistic. Because domestic trade after all just better appreciation too quickly or bruise recovery in the trade. But in the long term, the appreciation of the Renminbi exchange rate progressive is to address the complex foreign economic situation and development of national economy.
From the effects of the international, moderate RMB appreciation helps to alleviate the current global economic imbalances. Foreign investment in China is mainly due to optimistic about China's economic prospects, the appreciation of the renminbi in part reflects the expected. But on Chinese enterprises, the appreciation of the Renminbi has reduced the cost of the acquisition of investment abroad.
From the effects of the country, on the one hand, the necessity to RMB dollar export enterprises tremendous pressure. On the other hand, the appreciation of the Renminbi positive for importing enterprises limited. Due to our long-term result of import-dependent on the resource and the pricing right of speech will inevitably lead to the loss of our basic product import costs and cannot be effectively reduced. At the same time, the appreciation of the Renminbi, enterprises must adjust the export of goods, production of high added value products, appropriate to reduce the proportion of exports, open up the internal market, forcing the industrial structure adjustment.
Reference currency basket smarc
From an objective point of view, along with our long-term economic growth and continuous years of huge trade surpluses, RMB appreciation pressure facing grows. More importantly, the Renminbi exchange rate relatively rigid mechanism resulting in difficult economic structural adjustment. From our current basic economic situation, the Renminbi exchange rate underestimated is an indisputable fact. From China's economic growth, export situation improves, the huge impact of foreign exchange reserves, as well as the internal structure, the inflation rate, China has the ability to also necessary at the appropriate time on RMB appreciation to alleviate the current internal and external appreciation pressure. But whether it is for political needs, or for their own interests, Yuan one-time dollar will not solve the current trade conflicts, economic imbalance between the "panacea", the appreciation of the renminbi and cannot fundamentally improve China's trade with the Western developed countries. Moreover, China's economy is still just a warming, fragile, if developed Western countries attempt to let the Yuan one-time dollar, not only will seriously distort the trajectory of the Chinese economic development, more leads world many miserable lose situation, is "cruel and selfish." Based on the above considerations, the current exchange rate adjustment should follow "initiative, progressive and controllability" principle.
RMB exchange rate reform should focus on the improvement of the exchange rate mechanism, we emphasize the exchange rate reform must be committed to the exchange rate mechanism of the exchange rate flexibility to increase, and the other is the exchange rate cannot be single reference dollar pricing, and you want to reference currency basket. Specifically, the Renminbi exchange rate regime, increasing exchange rate flexibility, improve the euro and other currencies on the weight of the RMB exchange rate impact, really adjust the reference currency basket as well as the appropriate increase of the Renminbi exchange rate fluctuations, such as being able to relax the fluctuation range to 1%-2%, and moderate reduction of Central Bank intervention in the foreign exchange market, the exchange rate flexibility to reflect the foreign currency market supply and demand changes. Our aim is the constant improvement in the exchange rate mechanism, but in perfect, it will produce some by-products, half a product, that is, the Renminbi exchange rate appreciation of certain ranges. How much does the Renminbi appreciation space, not simple generalized, we have their own bottom line, but also with the United States and other Western countries in the interests of the factors behind the game, is complex, with economic considerations, but also political purpose, so for this problem is not simply an economic aspects. We hope to see that, in the appreciation of the Renminbi exchange rate of the process makes market-based mechanism becomes stronger, the exchange rate flexibility becomes even greater. (Author: Central China Banking Research Center)
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