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Qiu Jicheng: Moderate Depreciation Of RMB To Domestic Interest Rate Pricing

2014/5/4 13:31:00 29

a country's < a href= "//www.sjfzxm.com/news/index_cj.asp > > exchange rate < /a > is determined by the balance of payments supply and demand of its currency, and the balance of payments supply and demand is mainly composed of import and export trade and capital flows. At present, China is already an important developing economy with dual characteristics of world factories and world markets. From the perspective of commodity trade, China is a typical manufacturing core country, so the export competitiveness of China's economy is a key factor affecting the medium and long term exchange rate. 
The RMB P exchange rate has appreciated 30% over the past 20 years, while the RMB effective exchange rate has doubled. This year, the RMB has depreciated by 3%, and the depreciation rate has exceeded expectations. The central bank has not taken any measures to stop it. In particular, the central bank issued a notice on March 15th that it would expand the RMB to us dollar spot a href= "//www.sjfzxm.com/news/index_cj.asp" > the exchange rate < /a > floating interval from 1% to 2%, accelerating the devaluation speed of RMB. We believe that if the depreciation of the RMB does not cause the large escape of hot money, it is likely that the central bank would like to see it. In addition, this year's devaluation of the renminbi is also the result of changes in the domestic interest rate environment. After the Spring Festival this year, short-term interest rates began to fall. This can also be seen from the interest rate of financial products, bond interest rates and so on. The interest rate of the long end is still high, and in the process of market-oriented interest rate reform, the possibility of rising interest rates is very high. Against this background, the "moderate depreciation" of China's renminbi will be a reasonable choice to prevent the hot money from entering the domestic excessive arbitrage policy. 
From the international point of view, from 2013, the "a href=" //www.sjfzxm.com/news/index_cj.asp "currency" /a "of many developing countries has begun to depreciate, and China's recent depreciation is only following. In the next 1-2 years, in order to stimulate domestic fixed asset investment and real estate growth, lowering interest rates and lowering interest rates will be a big probability event, which means that the central bank will print money again. Under such a background, it will have to sacrifice exchange rate, which is a typical monetary easing policy. 
In the future, the depreciation of the emerging market countries has just begun. Especially since China's economic growth since 2009 mainly relies on leverage, how to leverage and adjust the balance sheet in the future is a very painful process in the future. P We may lose the exchange rate, but we get the interest rate pricing power. This is more important for stabilizing China's economic growth in the future. Therefore, at present, the market generally expects that the core of the central bank's exchange rate policy is to stabilize the exchange rate and ensure that the exchange rate fluctuates near a stable level. For example, this view is probably wrong in the vicinity of 6.2. What the central bank needs is a slow depreciation process of RMB in the environment of US dollar appreciation in the future. By the end of this year, the yuan will probably fall to around 6.4. Next year's trend needs to see the appreciation rate of the US dollar and the domestic economic situation. 
 some people worry about the trend of devaluation of RMB, which leads to a large amount of foreign exchange outflow and thus triggers financial crisis. We believe that the flight of foreign currencies is more likely to be the result of the real estate crisis than the cause. In comparison with the economic fundamentals of various developing countries, if the US dollar continues to appreciate, the economic problems faced by resource countries such as Brazil and Indonesia will be more serious. The devaluation of these countries will be more severe than that of China. If China's economic fundamentals are good and its investment opportunities are available, it will be able to accommodate overseas funds. China is now the second largest economy in the world, and its operation has its own rules. If the renminbi is in crisis, it will not be caused by external causes. 
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