Yi Xianrong: RMB exchange rate is facing major choices

Author: Yi Xianrong

The exchange rate problem is always a game between the country and the state, but the judgment of different countries will be different, the interests they are concerned about will be different, and the way of changing exchange rate changes will be different.The exchange rate relationship between the RMB to the US dollar is also the same, and it is also a game of interest relationships between China and the United States.Therefore, it is very important to understand this exchange rate relationship. It is very important to grasp its essence. Otherwise, the game between the country has been playing for a long time, and it cannot achieve the required effect at all.

From the Sino -US trade war in March 2018, to September 2019, the exchange rate of the RMB against the US dollar from depreciated from $ 6.24 to $ 1 and 7.18 yuan, and the depreciation rate reached 15%.Come rarely.The reason why the exchange rate of the RMB to the US dollar has such a significant depreciation, although the government has always emphasized that it is determined by the basic supply and demand relationship of the market. Just as the Chinese government's reform of the RMB exchange rate system in August 2015, the RMB depreciated sharply at that time. The government also said that the RMB also saidThere is no basis for depreciation, but in fact, this is a hedge method for the Chinese government to impose tariffs on US commodity tariffs on the United States.The Chinese government hopes that through the devaluation of the RMB to the US dollar to comprehensively reduce the prices of China's exports of goods exports to the United States, so that the competitiveness of China's export of commodity prices will not weaken, and exports will not decrease.

Because no matter how the Chinese government claims that the exchange rate of the RMB to the US dollar is determined by the market supply and demand relationship, the Chinese government must control the RMB exchange rate.Because the Chinese exchange rate market is basically a large state -owned financial institution, the government is too easy to quote the quotation of these financial institutions.Due to the experience since the reform of the RMB exchange rate system in 2015, the Chinese government basically believes that it can control the entire market, both in the shore market and the offshore market.Therefore, the Chinese government will definitely think that it is the least cost -effective hedging method to hedge the US -US commodity tariffs on the US export of goods to the United States through the devaluation of the RMB to the United States.

In fact, China ’s primitive businessist model (that is, the export is good, the import is bad, and the export that exceeds imports will increase the wealth of a country through the accumulation of currencies (previously gold).There is no difference, which also allows China's exchange rate policy to return to the era of gold (that is, to increase exports through exchange rate depreciation).But in fact, under the current international currency system and the global economic integration, the depreciation of the exchange rate is always a double -sided blade.It may be good for yourself, or it may seriously hurt yourself.

The excessive depreciation of the RMB to the US dollar is a tariff that can hedge the US exported goods, but this hedging effect is very limited.It can be seen from the announcement of the latest import and export information announced by the General Administration of Customs of China. In August, China ’s exports had shrunk by 1%, and imports have decreased by 5.6%, shrinking for 4 consecutive months. The export performance has reduced China's trade surplus significantly compared with July.Especially for imports and exports to the United States, exports have shrunk by 16%, and imports have shrunk by 22%.This is of course the result of the Sino -US trade war, but it can also be seen that the RMB's significant depreciation of the US dollar plays a very small effect. It is also very limited to the export boost effect, but it hurts China's entire import.

Moreover, the Chinese government is confident that the Chinese government has hedged the United States' tariffs on goods exporting to the United States to export the United States exported to the United States with the depreciation of the US dollar.Because this time the RMB depreciation of the US dollar is so large that it has not fled a large amount of funds like the reform of the RMB exchange rate system in August 2015. From the exchange rate of the RMB to the US dollar from 6.21 to December 2016 in August 20156.93, its depreciation is about 12%, but during this period, Chinese foreign exchange reserves decreased by more than 1 trillion dollars. If the funds that escaped through civil pipes may be huge.And during this period, the Chinese government spent the power of nine cattle and two tigers to reverse the expectations of the RMB's depreciation of the US dollar.

However, the depreciation of the exchange rate of the RMB against the US dollar this time is much greater than the last time. Why did you flee a lot of domestic funds like the last time?This is that the Chinese government has a rigorous control system for the sharp depreciation of the exchange rate of the RMB to the US dollar.Easy.Of course, the most important thing is that various foreign investment opportunities have been fully contracted, especially in real estate investment in countries around the world. Domestic investors have begun to realize that foreign investment risks are not willing to escape funds abroad.

At the same time, although the exchange rate of the RMB against the US dollar is depreciating, domestic investment opportunities are currently better than the international market, because domestic real estate investment or domestic financial investment can find suitable opportunities.However, the Chinese government cannot prevent domestic funds from escaping through folk ways, and cannot prevent the funds of Chinese enterprises from intercepting abroad.There may be many funds in these two aspects.

In the past few days, as the Sino -US trade negotiations began to ease, on September 13, the RMB offshore market rose from 7.06 to 7.0311, an increase of 374 points from the previous trading day.The market basically accepts the idea of the Chinese government, and is expected to expect the future trend of the RMB to the US dollar exchange rate with the progress of Sino -US trade negotiations.However, it is not easy to reach a long -lasting agreement between China and the United States, and the trade war between China and the United States will continue.This also means that if the Chinese government's policy ideas do not change, the significant fluctuations of the RMB to the US dollar may be normal.In this case, the negative impact of the excessive depreciation of the RMB on the US dollar exchange rate will gradually be displayed.

This will not only seriously weaken the confidence of the international market for the RMB, but also seriously damage China's imports, and even affect the domestic economy.RecentHowever, the RMB depreciated so much, and investors in any international market are unwilling to hold excessive depreciation of currency assets.The government has also played the role of limitation.It can be seen that after the reform of the RMB exchange rate system in 2015, the significant decrease in the offshore market RMB deposit is related to the weakening of this confidence.This is an obvious example.Therefore, as far as the current situation is concerned, the Chinese government is facing a significant choice for the RMB exchange rate, which will comprehensively affect China's economic growth in the future.

(The author is a professor at the School of Economics of Qingdao University)