The US Dollar Broke 6.5 Against The Renminbi: Foreign Exchange Reserves Are Not Feasible To Hedge Against The Euro.

It is reported that a red RMB and a green dollar have been put together today. Financial media headlines Because the latest data from the China Foreign Exchange Trading Center show that yesterday (29), the central parity of the RMB against the US dollar reported 6.499, breaking through the 6.50 important barrier for the first time, making the exchange rate reform a new high since then.

This year, US dollar depreciation The speed of RMB appreciation has begun to intensify. The data show that since 2011, the appreciation rate of RMB against the US dollar has reached 1.41%, while its appreciation has only been 3% last year. Ding Zhijie, Dean of the school of finance at University of International Business and Economics, said the acceleration of the depreciation of the US dollar was mainly due to the overall improvement of China's economy and the gradual increase of interest rates to reduce inflation.

Ding Zhijie: the appreciation of RMB against the US dollar has reached 1.9% this year. First, the appreciation of the RMB exchange rate reflects the economic fundamentals. From the economic fundamentals, China's economic situation is far better than that of the major developed countries in Europe and the United States. Second, the appreciation of the renminbi helps to deal with inflation, especially imported inflation. We can see that the price of international commodities has increased considerably in recent years, and the appreciation of the exchange rate will make the price of these intermediate products lower than that of non revaluation.

The depreciation of the US dollar is a delight to those who want to study abroad, travel and shop. Theoretically, the depreciation of the US dollar relative to the Renminbi should be the magnitude of the decline in the same consumption price abroad. When buying things abroad, all dollar denominated goods or services should be cheaper and cheaper. But there are several joys and worries. Chinese exporters will face the pressure of rising prices. Others who hold dollars will also feel pressure. When Beijing's Ms. Jin returned abroad, some of her dollars would not be replaced in time. RMB Watching the dollar depreciate and depreciate, she felt a little stuck up.
{page_break}

China currently holds about US $1 trillion and 500 billion in long-term US debt, which accounts for half of China's total foreign exchange reserves. With the depreciation of the US dollar, China's foreign exchange assets are also gradually depreciating. According to last year's depreciation of US dollar to RMB 3%, only last year, because of the depreciation of the US dollar, China's foreign exchange reserves lost 45 billion US dollars. The number of devaluation this year may exceed that figure.

It has been suggested that foreign exchange reserves can be changed into euros or Huang Jinlai to avoid risks, but economist Ma Guangyuan does not think it is feasible because in the long run, the US dollar is still a good choice.

Ma Guangyuan: so for our foreign exchange assets, I think you have been talking about one direction, that is, diversification of investment and diversification. In fact, the statement itself is simple, but it is very difficult to do it. Where is it difficult? Even though there are many deficiencies in the US dollar, what else can we choose besides the US dollar? For example, if the euro is in crisis like last year, we may have a big risk. We can see that gold has risen, and buying gold is good. But we know that gold itself has no interest and the cost of storage. Once gold goes down, people will say why you don't take dollars. Why don't you take this? So this is a difficult choice. The choice we are facing now is that we have not made the worst choice without good choices.

Liang Xiaobin: quantitative easing is certainly effective. The gross national product of the first quarter is expected to be 2.2, but the first announcement is 2, and the correction is 1.8. That is to say, the decline is lower than expected. But what you want to read carefully is what caused the decline, especially in the first quarter of the year. If this factor is removed, the first quarter should be around 2.1. So overall, QE plays a role in the recovery of the US economy. Because the United States is a debtor country, its debt burden is not as bad as it used to be, because its debt burden is not as heavy as it used to be, which is why the politicians in Congress always want to depreciate the US dollar. Because its devaluation is of little harm to itself.

As a result of long-term foreign exchange shortage and low labor costs, China has always regarded exports as an important factor to drive economic development. Many enterprises are proud of their exports. Even if the profits from exports are not high, they are duty bound. In April 15th of this year, President Hu Jintao said in a speech at the Boao Forum on Asia that China will focus on expanding domestic demand, especially consumption demand in the next 5 years, while playing an important role in the balance of macroeconomic balance and economic structure adjustment to promote the balance of trade balance.

Economist Ma Guangyuan also pointed out that further devaluation of the US dollar is also an opportunity for us to change our ideas and further expand domestic demand and achieve trade balance.

Ma Guangyuan: if China's entire foreign exchange assets are to really avoid risks, it is to go back to China and stop talking about avoiding risks. I think the most important thing is to adjust our economic structure to rely mainly on domestic demand, expand domestic demand and reduce dependence on exports. In this way, if we gradually bring our foreign trade to a balanced state, there is not much risk for us. So I think whether it is the so-called diversification of investment, or other measures, it is a temporary solution to the problem. To really cure the problem or to adjust the structure of the domestic three carriages, I think there is no other way to avoid it.