Why Is The RMB Down?

Recently, the RMB against the US dollar.

The author believes that, combined with the recent centralized statements of some international financial institutions, it can reflect the current short selling.

First of all, the short selling of China is probably a "wolf pack effect" rather than a "herd effect".

Huge in China

Second, the rapid devaluation of the RMB exchange rate will do more harm than good to China.

In contrast to the appreciation of the renminbi and the deterioration of China's terms of trade and weakening the competitiveness of export enterprises, the depreciation of the RMB can promote export and expand the balance of payments surplus.

Moreover, the strengthening of the US dollar also means that the risk of depreciation of China's foreign exchange reserves is declining.

In this sense, devaluation is good.

However, the sharp depreciation may cause substantial damage to the entity and the virtual economy.

On the one hand, for the real economy, the rapid fluctuation of RMB will seriously disorder the production and operation of import and export enterprises and expand the exchange rate risk. At the same time, the large amount of foreign capital brought about by the sharp depreciation of the RMB may cause some enterprises, especially foreign-funded enterprises to increase their assets and profits to the country, and reduce the scale of investment in China, thus causing some pressure on economic operation and even employment.

On the other hand, for the fictitious economy, the sharp fluctuation of RMB provides the soil for speculation of "hot money", which may cause the sharp withdrawal of "hot money" in the financial market and real estate market, which will have a certain impact on the market order.

Data show that in September, when foreign exchange reserves were reduced by 60 billion 816 million US dollars, foreign exchange holdings in financial institutions also decreased by 24 billion 990 million US dollars in October, the first negative growth in nearly 4 years.

This further shows that with the expected weakening or even reversal of the appreciation of the renminbi, the withdrawal of "hot money" will also accelerate.

Third, the current RMB exchange rate is short of fear.

Careful observation showed that the actual drop in the first 12 days was only 0.29%.

On the one hand, we have huge foreign exchange reserves in hand, which is the most important material foundation and reliable guarantee against external shocks.

On the other hand, compared with the influx of "hot money", the monitoring of "hot money" outflow is more effective and more effective, and the early warning signals are more timely.

Moreover, from the perspective of economic performance, which can best determine the value and trend of a country's currency, China's economic operation is still steady in the process of urbanization, industrialization and strategic adjustment of economic structure, and it is one of the most dynamic economies in the world. This also determines that there is still room for the RMB exchange rate to rise steadily in the long run.

Of course, the current short sale also provides a warning to China's participation in the European debt crisis, that is, in the absence of effective prevention and control of its own risks, China's participation in the rescue should be prudent and timely and moderate, and we should give full consideration to our own strength.

Fourth, building an effective firewall against shorting can not be delayed.

Although the lack of energy is a fear of the short selling of RMB, considering that under the background of the overall downturn of the world economy, the so-called "wood show" is going to be destroyed, and the Chinese economy has long been thriving, which has increased the possibility of encountering external concentration shocks.

Therefore, it is very necessary to do well in front of the firewall to resist risks.

Specifically, the first is to promote the formation of endogenous economic power, to increase the contribution of domestic demand to economic growth, to reduce the excessive dependence of the economy on the external environment, and to reduce the risk of infection and exposure. Two, the promotion of RMB internationalization should be stable and controllable, so as to fully absorb the painful lessons of Japan's promotion of the internationalization of the Japanese yen in the 80s of last century and steadily push forward the internationalization of RMB. Three, we should substantially raise the width and depth of the "reservoir" of financial markets, vigorously develop the financial markets such as bonds, foreign exchange and derivatives, fully absorb overseas hot money and offshore RMB reflux, and enhance the resilience and flexibility of coping with large-scale capital inflow and outflow, so as to avoid such funds flowing into the real economy.