How Does The RMB Exchange Rate Affect The US?

(P) Federal Reserve Chairman Bernanke recently accused China of maintaining a low exchange rate for stimulating exports.

Although in recent years, the a href= "http://sjfzxm.com/news/index_cj.as" > RMB exchange rate < /a > has continued to hit a record high, the US still emphasizes the undervaluation of the renminbi.

On the one hand, the United States needs to boost exports. On the other hand, Sino US trade is not balanced. The pressure on the appreciation of the RMB exchange rate can solve these two economic problems.

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"P > exports and inbound tourism downturn are evidence that the current RMB is overvalued. The undervaluation and overvaluation of the RMB exchange rate are equally inappropriate and should be corrected to normal. With the rapid increase of RMB currency, the RMB tends to depreciate.

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< p > < strong > Federal Reserve Chairman Bernanke accused China of maintaining low exchange rate for stimulating exports: < /strong > /p >

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Bernanke, chairman of the Federal Reserve, attended the hearing of the Financial Services Committee of the house of Representatives 17 days ago. On the policy of China and Japan and the question of foreign currency exchange rate, Bernanke said, "China has been managing its own exchange rate for many years, and it has been below the real level for many years, so as to increase its exports." P

This is what economists call a zero sum game. Basically, when China benefits from it, we will suffer.

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P, as chairman of the Federal Reserve, Bernanke criticized the RMB exchange rate undervaluation from his own interests and sought an advantage in Sino US economic and trade cooperation.

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P President Obama has said he hopes to double US exports of goods and services over the next 5 years to 1 trillion and 570 billion US dollars in 2009 to create millions of jobs.

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< p > according to the statistics released by the US Department of Commerce, in 2012, the total export volume of the United States amounted to 21959 billion US dollars, an increase of 4.4%; < a href= "http://sjfzxm.com/news/index_q.asp" > trade deficit < /a > 540 billion 400 million US dollars, down 3.5%.

China's trade surplus with the United States increased by 218 billion 920 million US dollars to 8.2%.

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P shows that on the one hand, the United States needs to boost exports. On the other hand, Sino US trade is not balanced. The US pressure on the appreciation of the RMB exchange rate can solve the above two economic problems.

This is why the United States has been emphasizing RMB undervaluation for ten years.

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< p style= "text-align: center > > more and more signs indicate that the overestimation of the real effective exchange rate of RMB has dragged down the growth of the whole Chinese economy < /p >

The real effective exchange rate of RMB P has appreciated by more than 30% since 2005. Hong Bin, chief economist of HSBC Greater China, said that there was ample evidence that the yuan was very close to its equilibrium level in 2011.

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< p > China's economy has been slowing down since its peak in 2007, and this slowdown has increased in recent years.

However, the RMB exchange rate has gone against the trend.

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Since the beginning of this year, the renminbi has realized a nominal appreciation rate of 2% against the US dollar. If it is weighted by < a href= "http://sjfzxm.com/news/index_c.asp" > US dollar < /a > index, the actual appreciation of a basket of currencies will be as high as 6%. "P"

This is considered to be a proof of the overestimation of the effective exchange rate of the RMB.

The chief economist of the Industrial Bank, Lu political commissar, also said that the RMB exchange rate has been overvalued.

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< p > in the first half of this year, the export growth of foreign trade enterprises slowed down rapidly, and the survival of enterprises was difficult.

The biggest reason is that the rise in exchange rate squeezed profit margins, resulting in serious lack of confidence in orders and shrinking orders.

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At the same time, in the first half of this year, China's entry and exit tourism market appeared "ice and fire double days" situation: on the one hand, inbound tourism revenue has negative growth, while outbound travel has increased significantly. P

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< p > inbound tourism downturn is considered to be a circumstantial evidence of overvaluation of the RMB exchange rate.

The appreciation of the renminbi has increased the cost of traveling to China. However, the cost of outbound travel has become low for Chinese people. This also makes the huge increase of outbound tourism form a great contrast with the continuing downturn of inbound tourism.

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< p > < strong > RMB exchange rate depreciation is expected to increase < /strong > < /p >

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< p style= "text-align: center >" in 2013, the global competitive currency devaluation is getting stronger and stronger, while the RMB is obviously lacking in elasticity. < /p >

< p > as we all know, the RMB exchange rate undervaluation and overestimation are equally inappropriate and should be corrected to the equilibrium level. Therefore, the expectation of RMB devaluation will increase in the future.

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< p > because of the larger appreciation of RMB in the first half of this year, foreign trade encountered a more severe external environment, and China's exports were worse than its neighboring countries.

Data show that China's import and export value increased by 8.6% in the first half of the year, and imports and exports in June were the first negative growth in 16 months.

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"P", since the launch of the foreign trade data in June, the spokesman of the Ministry of Commerce has exposed the worries about the cold spell of foreign trade in the second half of the year on different occasions.

This indicates that the renminbi may adopt moderate depreciation measures to relieve export pressure.

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< p > the Secretary for foreign trade, Mr Yi Gang, said recently that China is steadily pushing forward the reform of the exchange rate in the direction of marketization. The biggest feature is to let the market supply and demand determine the exchange rate.

Recently, whether the market's recent exchange rate and forward exchange rate, or the implied exchange rate of financial products, all show that there is a two-way expectation in the RMB exchange rate market.

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< p > Yi Gang said that for a long time, the renminbi has always been a one-way appreciation expectation, and some time periods also have devaluation expectations, which means that the RMB exchange rate formation mechanism is being further marketed.

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< p > from the past RMB exchange rate underestimation to the current RMB exchange rate has been overestimated. If it continues to appreciate, it will only exacerbate the overvaluation of the RMB and increase its exchange rate risk.

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< p > although the central bank set a target of 13% for M2 growth in 2013, it remained at 15%-16% level for 1-5 months, significantly higher than that in the second half of last year.

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The growth rate of China's broad money supply (M2) since the end of this year has finally dropped markedly in June. In June, the growth rate of M2 reached 14%, reaching a low level in the year and reached a new low this year, but still higher than the target of 13%.

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< p > with the rapid increase of RMB currency, the RMB will tend to depreciate.

Because the rapid increase of money supply will cause inflationary pressure, and inflation pressure will lead to a decline in the local currency exchange rate.

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< p > < strong > epilogue < /strong > < /p >

Since 2005, the RMB has appreciated more than 30% against the US dollar. The renminbi has become the strongest currency in the world, and it is obviously inelastic and overvalued, not undervalued.

If it continues to appreciate, it will only exacerbate the overvaluation of the renminbi and increase its exchange rate risk, which is unfavorable to the sustainable development of China's economy.

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