subject: Discussion Of The Persistence Of Exchange Rate Appreciation Is Limited Mistakes [print this page] RMB exchange rate reform is ripe, even to a managed floating exchange rate system, the yuan will not appreciate substantially. Importantly, we should focus more on a basket of currencies in the short term by linking the yuan to a basket of currencies to stabilize market expectations, long-term increased exchange rate flexibility.
Bank of the latest release of the first quarter monetary policy report, referred to the yuan exchange rate formation mechanism will be to "further improve the market supply and demand with reference to a basket of currencies, managed floating exchange rate system." This suggests that the current RMB exchange rate reform is ripe. Despite the appreciation of the RMB is facing pressure to do the short term, but we need not talk about the mere mention of appreciation, or have a strong "fear of floating", because after the revaluation of the RMB exchange reform, and not much space.
From now, the discussion on the RMB exchange rate of four errors persist.
One misunderstanding is to find the reasonable value of the RMB exchange rate issue as the key. RMB in the free market what should be the price, although the discussion was "one after another", but never reach a consensus. Because most of the basic assessment methods, the results obtained on very different. And to judge on this issue and debate is often with a strong political overtones, making the yuan is overvalued or the underestimation of the argument meaningful.
Misunderstandings Second, the bilateral exchange rate against the U.S. to judge whether the RMB appreciation. The liberalization of exchange controls, the effective appreciation of the RMB exchange rate and more relevant and better reflect the overall level of the RMB, the yuan appreciate it, should pay attention to the situation of a basket of currencies, rather than the U.S. dollar bilateral exchange rate.
The third misunderstanding is the U.S. dollar bilateral exchange rate appreciation would lead to the decline in exports. Experience shows that the RMB against the U.S. dollar and the decline in exports between the two does not have the obvious correlation, changes in export volume and export the country's economic situation and the real effective exchange rate seems to be more closely associated. It may be inferred that the yuan against the U.S. dollar will lead to the decline in exports in general worry is unnecessary.
Mistakes of the Fourth, a fixed exchange rate better than the floating exchange rate. Terms of the open economy, if the fixed exchange rate system that is superior to a floating exchange rate system, which would be a misunderstanding. First, fixed exchange rate system pegged to the dollar does not help the U.S. dollar against international currency markets, the impact of the strong fluctuations. At the same time, the experience of the Asian financial crisis, exports suffered a serious setback, in order to maintain the fixed exchange rate, China will have to use the export tax rebate policy, thereby increasing the financial burden. In addition, the gradual liberalization of capital controls in China, if a fixed exchange rate, the central bank must give up monetary policy autonomy. Therefore, the pressure increased with the recent appreciation of the RMB, with a managed floating exchange rate policy is the decision-making informed choices.
Even if the short term, the appreciation of RMB is indeed faced with the pressure of RMB appreciation, we determine the space is not large, because of the following points:
First, the trade surplus will decrease. According to April, import and export data, import and export value was 238.16 billion U.S. dollars, up 39.4%. Which, although the balance of trade balance deficit to surplus from March, reaching 1.68 billion U.S. dollars, but the trade surplus was still lower than the level a year earlier, down 87%. In fact, if excluding the impact of processing trade, China has been seen as early as 2009, trade deficit. Strong domestic demand and continued weakness in external demand led to lower trade surplus, while gradually changing the mode of economic growth, trade surplus will gradually decline in the future, this will help ease pressure on RMB appreciation, but also the implementation of monetary policy, central bank more flexibility in space .
Second, facing the pressure of speculative space assets. With the Chinese government unprecedented control policy in real estate, real estate speculation demand will be inhibited, reduced room rates are also facing greater.
Meanwhile, the severe real estate control policies and measures have been seriously affected domestic and foreign investors confidence in the asset-seeking investment in the Chinese stock market is also a larger decline. Face of China's asset bubble burst, will curb foreign speculators in speculative assets in China, even if the floating of RMB exchange rate system, nor will it create further pressure on RMB appreciation.
Third, the degree of monetary policy than the United States. Although China has not implemented quantitative easing monetary policy, but the degree of monetary policy easing in essence to even the United States. Although the level of China's GDP is only about a third of the United States, but the total amount of base money and broad money stock has exceeded the United States. Loose monetary policy push up inflationary pressures, coupled with a lower interest rate, these factors will inhibit the appreciation of the RMB exchange reform after the pressure.
Fourth, the strong U.S. dollar against the U.S. dollar will help to reduce space. The dollar has appreciated 30 percent against the euro, along with the U.S. current account deficit continues to improve, the U.S. domestic economic recovery, the euro zone sovereign debt escalation of the crisis, we determine the dollar will remain strong. Guer, the yuan has strengthened against the euro, the reform on RMB appreciation against the dollar after the space has not.
Therefore, I believe that the current RMB exchange rate reform is ripe, even to a managed floating exchange rate system, the sharp appreciation of the renminbi will not appear. At present, the important thing is that we should not dwell on whether the RMB exchange rate at a reasonable level so on, but should pay more attention to a basket of currencies in the short term by linking the yuan to a basket of currencies to stabilize market expectations, term to be increased exchange rate flexibility, and ultimately establish a managed floating exchange rate system.
