subject: Sharp Appreciation Of The Yuan To Continue May Lead To Economic And Financial Crisis [print this page] From Japan's past experience, the trade surplus and foreign reserves accumulation and the level of exchange rate has no direct relationship, even though the sharp appreciation of the RMB may not be able to reduce the trade surplus and foreign exchange reserves continued to increase.
Beijing University China Center for Economic Research (CCER), said Lin Yifu, director of the RMB is not grossly underestimated.
In the RMB is not undervalued capacity of the domestic economy is not high case, a substantial appreciation of the speculative pressure on the Elimination of international speculators, will play into the hands of speculators middle of the national economy will have to pay a huge price.
Lin Yifu is in the "CCER China Economy Observation" Eighth report of the meeting made the point of view. Lin said, as long as is being done to our country insist on autonomous, flexible, affordable principle, a managed floating exchange rate system, each action that the rate of RMB exchange rate is only about 3%, speculators make money and the case of loss will be asking for trouble and walks away, the pressure on the renminbi speculation will disappear.
Speculative pressure on the RMB has not gone before, foreign financial speculators may take advantage of China's capital account controls on some of the legal channels, such as real estate investment in China to carry out the dual exchange rate and real estate speculation. Therefore, Lin Yifu that China needed the real estate market speculation the necessary controls to prevent the real estate bubble.
Lin Yifu that after 2003, the international financial speculation appreciation of the renminbi is the use of the Japanese government and U.S. government pressure the Chinese government, the financial speculators, according to the historical experience of the 1980s, that as long as the U.S. government of a country or region where the currency pressure the country or region will eventually succumb to pressure the government to allow significant currency appreciation; and the use of foreign exchange reserves increased dramatically to become the world's largest foreign exchange reserves, most people will think this is caused by the yuan undervalued currency, the yuan needs to rise substantially psychological factors mitigate the increase in foreign exchange reserves. Lin Yifu pointed out that Japan and the U.S. government's allegations against the renminbi is not established, but for their own domestic political needs.
Over the years, served as the world's largest stockpile in the past 10 years Japan has sharply increased foreign reserves. Lin Yifu said that from Japan's past experience, the trade surplus and foreign reserves accumulation and the level of exchange rate has no direct relationship, even though the sharp appreciation of the RMB may not be able to reduce the trade surplus and foreign exchange reserves continued to increase.
Lin Yifu that if the yuan appreciates sharply, as many enterprises engaged in import and export trade in order to under-reporting of imports of raw materials and intermediate goods prices, the final products of high export prices reported to inflate the trade surplus in cash in exchange rate gains. During the exchange rate or the expected exchange rate appreciation, the current account surplus but will increase it. Foreign funds will be through various channels, inflow of arbitrage, so that more capital-account surplus emerged. In the current account and capital account surplus is to expand the case, foreign exchange reserves will increase.
Arbitrage in the period, exchange-rate appreciation will reduce the export sector and import substitution sector's competitiveness, reduced exports, increased imports and reduce the current account surplus. However, the export sector and will be accompanied by import substitution sector excess capacity situation, so the drop in prices to offset the effect of exchange rate appreciation. Therefore, an adjustment after the current account surplus is likely to remain as it is.
Lin Yifu said China's current overcapacity situation is quite prominent, if the exchange-rate appreciation would make the situation worse overcapacity, and even may lead to severe deflation, corporate earnings will drop substantially, finally press down the banks bad debts may be quickly rebounded, and even lead to economic and financial crisis. If you're lucky, after the sharp appreciation without a major economic and financial crisis, after an adjustment of China's economy will continue to sustainable development, foreign investment will remain to take advantage of China's reform and opening up 20 years of excellence in the manufacturing industry cluster effect of form, our country as an export processing base, and in order to enter the rapidly expanding domestic market in China continue to flood of the capital account surplus will continue to be huge. In the current account and capital account has a huge surplus, the foreign exchange reserves will continue to rapidly increase.
