The Appreciation Of The Renminbi Slowed Down To Pave The Way For Follow-Up Monetary Policy.
Liang Zhaoji, senior economist at DBS bank in Greater China, pointed out recently that the market is worried about the increasing risk of China's rapid economic decline and believes that China's macroeconomic policy has been changed from inflation prevention in the first half to prevent the economic growth from slowing down rapidly. More analysis has been made on easing monetary policy. The interpretation of these policies seems reasonable. But after deep thinking, it can be clearly seen that the appreciation of the renminbi is slowing down, in fact, it can pave the way for the implementation of the "one to one" monetary policy as soon as possible.
Since the publication of the strategy of rethinking the renminbi appreciation two months ago, Liang Zhaoji, after witnessing a marked slowdown in the recent appreciation of the renminbi, said that the slowdown in the rate of appreciation would, of course, help the export enterprises. But because of the rising production costs and the slowing down of overseas demand, it is the real fatal injury of exporters. Therefore, the performance of exports will not be fundamentally changed in the second half of the year because of the slowdown in the appreciation of the renminbi. The real goal of the slowdown is to fundamentally reverse the market's appreciation of the renminbi, plus the new regulations promulgated by the State Council to strengthen the control of capital inflows while simplifying the approval procedures for outward investment, which will more effectively reduce the inflow of hot money. Liang Zhaoji believes that this series of closely related measures should reduce the growth rate and speed of future foreign exchange reserves.
Liang Zhaoji pointed out that monetary policy can not operate normally and effectively to deal with inflation if we do not solve the expected strong appreciation of the renminbi and the problems it brings. Although Asian central banks have increased interest rates to curb inflation, the Central Bank of China can only use the deposit reserve ratio and credit limit to control lending growth, and the result is not very effective. In the face of the risk of inflation, the central bank recently relaxed the lending limit by 5%, in order to prevent the risk of a sharp economic downturn. In Liang Zhaoji's view, the latest series of policies is to "open the way for higher interest rates" because "sustained negative interest rates are the best environment for inflation", and "inflation expectations are deepening, while the overall economy is still in a high growth cycle", so "interest rate adjustment is inevitable."
Liang Zhaoji said that from the perspective of the long-term development of the whole country, I still believe that the appreciation of RMB is still on the track of appreciation in the medium and long term, but the rate and magnitude of appreciation after 2008 will be slow and limited. It is believed that the short-term slow rate of the RMB exchange rate and the one and one monetary policy combination should be most conducive to resolving the multifaceted contradictions that the Chinese economy is facing now.
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