Zhang Ming: How Do We See The Recent Trend Of RMB Appreciation?

One is that the appreciation trend of the RMB against the US dollar has slowed down suddenly, and even has a reverse trend. The second is that the renminbi has changed from the depreciation trend to the appreciation trend of the euro, and the appreciation has obviously enlarged since August.

The consequence of the superposition of the two phenomena is that the effective exchange rate of RMB is still in a relatively stable trend of appreciation.

The RMB to us dollar exchange rate has not risen or fallen in the near future. In a sense, it has realized the two-way fluctuation of the RMB to the US dollar exchange rate. This is a brand-new phenomenon since the RMB exchange rate reform in July 2005, which deserves our attention and analysis.

The real growth rate of China's export and trade surplus declined significantly in the first half of 2008, due to the combined effects of six factors, namely, external demand reduction, RMB appreciation, export tax rebate rate reduction, labor and capital costs rising, energy and primary product prices soaring, and environmental protection and energy saving standards.

The actual growth rate of exports dropped from 24% last year to 13% in the first half of this year.

The trade surplus in the first half of this year dropped by 11.8% compared to the same period last year, a net decrease of US $13 billion 200 million.

The improvement of the imbalance of international payments slowed down the pressure of RMB appreciation.

The real growth rate of fixed asset investment in the first quarter and the second quarter of 2008 was 15.8% and 14.7%, respectively, which was significantly lower than the 21.5% in 2007.

The trade surplus in the first quarter and the second quarter of 2008 decreased by 10.6% and 13.3% compared to the same period last year, compared with the 47.7% year-on-year trade surplus in 2007.

Despite the steady increase in real consumption, the decline in investment and net exports slowed down economic growth. In the first quarter and the second quarter of 2008, GDP increased by 10.6% and 10.1% respectively, significantly lower than the 11.9% in 2007.

In addition, from the second quarter of 2008, PPI rose more than CPI, and the gap continued to widen.

If the rise of PPI can not be passed to CPI in time, this means that the profits of manufacturing enterprises will be overloaded.

The deterioration of the economic fundamentals is one of the root causes of the sharp decline in the A share market in recent months, and it is also one of the important reasons for the slowing down of the appreciation of the RMB against the US dollar.

Since June 2008, the Chinese government has significantly strengthened the monitoring and management of the balance of payments, especially by guarding against the inflow of hot money through trade, FDI and non resident Renminbi deposits.

Since June 18th, the safe has issued the relevant regulations on "reporting non resident RMB account data", and strengthened the statistics and monitoring of eight types of Renminbi accounts for non residents.

Since July 14th, the safe, the Ministry of Commerce and the General Administration of customs have begun to implement the network verification management of foreign exchange settlement.

From the same day, the safe also strengthened the management and monitoring of the export advance payment and import deferred payment.

Since July 18th, the NDRC has issued the notice to further strengthen and standardize the management of foreign investment projects, and strictly prevent the abnormal influx of foreign exchange funds through the FDI channel.

A large number of measures to strengthen capital account management in six or seven months have increased the cost of short-term international capital going into and out of China, thus inhibiting the continued inflow of short-term international capital to a certain extent.

Since June, the monthly increase in foreign exchange reserves has been lower than the favorable balance between trade surplus and FDI for two consecutive months, indicating that short-term international capital inflows have slowed down significantly.

This requires commercial banks to pay the RMB statutory reserve requirement in the US dollar, resulting in more foreign exchange funds staying in the commercial banking system and reducing the growth rate of the central bank's foreign exchange reserves.

For example, in June 2008, China's foreign exchange reserves grew by only 11 billion 900 million dollars.

However, since the central bank raised the statutory reserve requirement ratio by 1 percentage points in June, if the commercial banks pay the RMB statutory reserve requirement in the US dollar, the total inflow of foreign exchange funds in June 2008 will still exceed US $55 billion.

Since macroeconomic regulation and control focus on preventing inflation from preventing economic downturn, manipulation of inflation through the appreciation of the renminbi may give way to the reality of maintaining economic growth through maintaining the stability of the RMB exchange rate (or even artificially creating a moderate depreciation of the renminbi).

Because exports are mostly labor intensive industries, the decline in exports may lead to China.