Wang Yong: A New Strategy For Stabilizing Prices; &Nbsp; Going Out Of The Renminbi.

Cross border Trade RMB settlement extends to the whole country, and steadily promotes RMB direct investment overseas and overseas. project RMB financing It is equivalent to opening a foreign exchange direct investment RMB settlement. RMB The flow to overseas channels will help to ease domestic high foreign reserves, high appreciation expectations and high. inflation Pressure "three high" situation, to achieve the purpose of diverting excess liquidity.

　　 Wang Yong

Just when the market expects monetary policy to be loosened in the second half of the year, the Central Bank branch president's symposium has clearly stated that domestic inflation expectations are still strong and the basis for stabilizing prices is not strong enough. Therefore, in the second half of this year, we must continue to implement a sound monetary policy and maintain the necessary policy strength. One of the important policy measures adopted is to extend the RMB settlement of cross-border trade to the whole country, steadily push forward the pilot project of RMB financing for overseas projects, and release the RMB settlement of foreign direct investment.

The signal that this policy measure shows is that stabilizing prices in the second half of the year will rely more heavily on the "going out" of the renminbi.

The expansion of cross-border trade RMB settlement to the whole country, steady promotion of RMB direct investment abroad and RMB financing for overseas projects, and liberalization of foreign direct investment in RMB settlement are all important steps to speed up the process of internationalization of RMB, reduce dependence on the US dollar and counter inflation. Earlier, the Chinese government has expressed its special concern about the US fiscal deficit, raising the debt ceiling and its quantitative easing monetary policy, which will continue to cause global inflation, devalue the dollar and hurt the huge dollar assets held by China. Although the renminbi is still a distant target for the international currency, there are many advantages for China to settle a considerable portion of its trade in Renminbi at the moment. For example, reducing the exchange rate risk of Chinese exporters can also reduce the accumulation of China's foreign exchange reserves. In view of the recent turmoil in the international financial market, the euro has been seriously suppressed, and the risk of foreign exchange has intensified. In addition, the international and domestic environment is still undergoing profound and complicated changes. Especially, the economic recovery of big countries such as Europe and the United States is weak, and the sovereign debt crisis is becoming more and more intense. The deep-seated contradictions of China's economic and social development still exist. The exchange rate of the international mainstream settlement currencies fluctuated, which brought great risks to the trade settlement of the enterprises. Therefore, with the continuous growth of China's foreign trade volume, it is imperative to extend cross-border trade RMB settlement to the whole country.

Moreover, the internationalization of the RMB must initially expand the share of the RMB's outflow through cross-border trade channels, thus forming a certain scale, thus laying a solid foundation for the second and third steps of RMB internationalization. More importantly, the "cross-border trade RMB settlement pilot management measures" and its implementation rules, "notice on issues related to the expansion of cross border trade RMB settlement pilot", and the introduction and implementation of policies and regulations for the pilot management of RMB settlement for offshore direct investment, etc., are equivalent to the opening of a series of channels for RMB to flow overseas, which is conducive to easing the "three high" situation of high domestic foreign reserves, high appreciation expectations and high inflation pressure, and achieving the purpose of diverting excess liquidity. In the past, the practice of recovering liquidity by continuously raising the "three rate" has created an "aesthetic fatigue" in the market and produced some "antibodies" and "drug resistance". Therefore, the development of the situation calls for the introduction of new monetary policy tools, and the "going out" of the renminbi is a feasible innovation tool.

Since last June 22nd, after the second batch of cross border RMB settlement expansion, the business development situation is gratifying. However, there are still some problems to be solved in business practice. For example, the details of specific operation in the legal system are not standard and specific. The so-called "side", that is, the current foreign exchange policy, such as the audit materials required by the service trade and other current account clearing banks, is basically based on the relevant provisions of the current foreign exchange management. Most of the trade import payments refer to the foreign exchange management regulations; the so-called "lag", that is, the lag of some of the practice documents, and the existing transaction items in economic life can not be found, and the actual implementation has far exceeded the standard documents issued and implemented. Moreover, there is not enough coordination with foreign exchange management departments. Banks and enterprises or through changing currencies, making use of the interest arbitrage between the onshore and offshore markets and the pure arbitrage of exchange rate differences, or by changing currencies to evade tighter foreign exchange supervision, the effect of foreign exchange policy is greatly weakened. At the same time, foreign direct investment and RMB securitisation, the central bank's cross-border RMB policy is too conservative. In addition, the role of cross border RMB management is relatively vague, weakening the effect of monetary policy. The introduction of cross-border RMB settlement system extended the extension of the entire RMB management from domestic to overseas. However, there is a big difference between the RMB circulating abroad and the nature and influence of RMB in circulation. The movement of RMB abroad is basically affected only by market factors, such as the supply and demand of local renminbi, the local market interest rate, RMB exchange rate expectations, and local monetary policy. Theoretically, the RMB from overseas to China should be in line with the domestic renminbi, which is totally influenced by domestic market and domestic monetary policy. However, the current RMB inflow through various trading items is not subject to the supervision of domestic monetary policy, and has a negative impact on domestic tight monetary policy.

Since the "going out" has become an important strategic measure to stabilize prices, we must take measures to solve these problems as soon as possible. I believe that it is mainly in reshaping the new concept of internationalization of monetary policy, clarifying the design principles of cross border RMB settlement system, and strengthening the three aspects of offshore RMB market development under the conditions of strengthening supervision.

With the formation and development of cross-border RMB movements, the scope and scope of RMB operation will also expand from inside to outside. This requires that the formulation and operation of monetary policy for RMB should also enter the international orbit at an early date. The traditional closed monetary policy thinking pattern has been outdated and must be reshaped. Its operation strategy must also be accelerated. The design principles of cross border RMB settlement system should take into account the particularity of the RMB as the local currency, and take into account the authenticity of cross-border transactions. At the same time, we should take into account the complexity of domestic and foreign markets. We should strive to ensure the rapid development of cross-border RMB business, while also ensuring the standardized and safe development of cross-border RMB settlement.

As an offshore RMB market, China's Hongkong area is expected to expand to 2 to 3 trillion yuan in the next two or three years. In the process, Hongkong foreign enterprises should be encouraged to use RMB FDI to replace foreign currency FDI, encourage RMB trade settlement, and promote the use of RMB in Hongkong and other countries, especially foreign enterprises in Hongkong. And further enrich the RMB products, activate the two level trading market, ensure the smooth flow of RMB reflux mechanism, and ensure that the development of offshore market will accelerate the internationalization of the RMB while controlling the impact of domestic currency supply, foreign exchange reserves, hedging operations and capital flows both inside and outside the country, and thus play its due role in stabilizing prices.