Preparing For A New Round Of RMB Appreciation Game

In May, exports increased by about 48.5% compared with the previous year, with a surplus of US $19 billion 500 million.

This data exceeds the expectations at home and abroad.

The contrast between the "expectation" and the actual data gave an excuse for the US Congressmen headed by Schumer, who always spoke for the appreciation of the renminbi.

Recently, Schumer is preparing to mention a few years ago that three members jointly called on the US government to press the renminbi to appreciate.

The Wall Street journal used the word "angry" for US Treasury Secretary Geithner on China's trade surplus. It was very emotional and very incitement.

It seems that China is prepared to deal with the new round of RMB appreciation.

The so-called expectations at home and abroad, especially the expectations of Hongkong and domestic stock market analysts, are actually very misleading.

All the analysis in April is that China's economy is overheating, the RMB should appreciate, while interest rates are raised to prevent inflation from worsening.

In mid May, when the statistics bureau announced that CPI grew by 2.8% in April, some analysts even predicted that the central bank would raise interest rates the next day.

However, since late May, China's economy will "decline sharply", and the "two bottom finding" has become a hot topic.

These analyses exaggerate the impact of the real estate market regulation on the economy, especially exaggerating the impact of the European sovereign debt crisis on European exports of Chinese goods, distorting the "expectation" of China's export growth, making the difference between the normal export data and the so-called "expectation" artificially different, and it may become an excuse for triggering a new round of exchange rate friction between China and the United States.

The difference between the larger "expectation" and the surplus data comes from some specious analysis.

For example, it is wrong to judge the lagging impact of the European crisis.

In fact, at present, the export growth is the delivery figures of the previous orders. The export situation should be judged according to the PMI's new order index.

The new export orders for PMI in the early stage are running at a high level, although most of them are short-term orders, but at least they have a leading indicator significance for the growth of export situation in the next three months.

In other words, the growth rate of exports in May is expected.

If the European economy slumped and the import market shrinks, the effect would be apparent only after the new order was introduced.

For example, the impact of the European sovereign debt crisis on China's exports is also overestimated.

Statistics show that exports to Europe account for about 19% of China's export share and the largest share.

The analysis clearly overestimated the impact of the European crisis on China's largest export market.

European economic growth is likely to slow down again due to the sovereign debt crisis and uncertainty in the effectiveness of crisis management.

But because of the depreciation of the euro, the export growth may partly offset the short-term negative impact of the future tightening policy on the economy.

The long-term impact of austerity policy should be positive.

Therefore, I believe that the impact of the euro zone economic downturn on the global economy and trade will not be worse than the situation in 2009.

The impact on China's export trade is also smaller than that in 2009.

Exaggerating the effect of this effect has made China's trade resume normal growth and can not be accepted in a calm way. It has caused Americans to "fury" the normal May data.

In addition, significant changes in data relate to negative growth last year.

If we consider the decline of exports in May last year, a factor of 25.9%, the growth of 48.4% is still a certain distance from the level before the crisis. This shows that the external demand situation is still consistent with our judgement at the beginning of the year: the world economy is recovering as a whole, but it has not recovered to the level before the crisis, and now it will also superimpose the influence of the European sovereign debt crisis.

Although the overall foreign trade situation will change the trend of last year's decline, the contribution of surplus growth to economic growth is only slightly negative.

Moreover, it should not be overlooked that the increase in imports is greater than the increase in exports.

Because of the problem of cardinal numbers, there is a sizeable absolute surplus.

However, China's economic activity is active, stimulating domestic demand growth and increasing demand for imported goods.

From the comparison of import growth and export growth, besides ASEAN as a whole and a few countries, China's import growth is less than that of export growth. For most countries and regions, including the United States and Europe, China's import growth outpaced export growth.

This should be a major change. Import growth, especially from the United States, should be further expanded if the United States really lifted restrictions on some high-tech products.

Americans should be reminded that this is their problem.

During the last strategic dialogue, the US Commerce Secretary said that only 2% of the products purchased by China were banned, but the proportion of the total value of these 2% products accounted for 98% of the products was avoided.

We should submit more purchase orders for American products that China needs.

China's import growth can play a very positive and positive role in promoting the recovery of Global trade and the recovery of the global economy.

These are the reasons why we need to keep clear to the US government that the RMB exchange rate is absolutely not the key to the balance of international trade and the balance of international economy.

It is not necessary to let normal trade data become an excuse for replaying RMB appreciation. It is not necessary for us to play with the US Congressmen to play a game of RMB appreciation. We can not let the RMB exchange rate become the topic of G20 summit and other international multilateral platforms.

The recent increase in wages of some export processing enterprises under severe pressure has made it clear that simply raising the RMB exchange rate under the premise that the prices of export products can not be raised will make the space for the increase of labor wages completely lost, thus directly hindering the first income distribution reform of export processing trade enterprises.

This is what the author has been saying. After the completion of the reform of the domestic factor price mechanism, it is possible to assess the RMB's overvaluation.

Therefore, we must not unilaterally appreciate the successful completion of our reform, and it is most important for us to promote the negotiation between entrepreneurs and US importers and enhance the prices of export processing products.