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A Sharp Fall In The Renminbi Or Hinting That China'S Economy Is Going Down

2014/3/5 20:41:00 33

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Last Friday, the RMB fell sharply in the intraday paction, but after a slight recovery later, the spot exchange rate of RMB against the US dollar closed at 6.1450, down 0.27% on the same day.

When the week and the month depreciated 0.9% and 1.4% respectively, they all set a record.

Yuan, commonly known as the renminbi, has fallen to its lowest level in about 10 months.

as reported, government intervention reached a "crazy level" last Friday.

During the week and a half, the people's Bank of China pressed down on the renminbi and set a very low daily reference rate for each trading day, which should not exceed 1% of the central parity set by the central bank, and instructed its institutions to increase their holdings of US dollars.

no one believes that the people's Bank of China has ended its intervention in the foreign exchange market.

For example, Lai Chunmei, an analyst at Bank of East Asia, said there is a "good opportunity" for the renminbi to "break through 6.20 of the important psychological barrier".

Lai Chunmei believes that this week may be fulfilled.

, why do the people's Bank of China manipulate the "a href=" http://www.91se91.com/news/index_c.asp "RMB devaluation" /a? There are now two claims that have been accepted by the people almost universally.

However, these two do not seem to be close to the facts.

the first widely accepted view is that the active intervention of the people's Bank of China, in the words of foreign media, "is a prelude to the central government's further implementation of the reform of the foreign exchange market, including the expansion of the fluctuation range of single day trading."

We are told that these reforms may be announced at the upcoming National People's Congress.

The meeting will be held in Beijing on Wednesday.

this explanation is not logical at all.

How can we make the RMB exchange rate mechanism less market oriented through this vigorous intervention? This will lay the foundation for more market-oriented RMB exchange rate mechanism in a few days.

The second widely accepted view is that the central bank has decided to teach the speculators who bet on the appreciation of the renminbi. The best lesson is the loss of capital. P

Indeed, a lot of hot money is flowing into China, hoping to make a big profit from the so-called "single bet".

for example, UBS said that the amount of funds flowing from informal channels in 2013 exceeded 150 billion US dollars.

Judging from the activity as of this year, this estimate may be on the low side.

Deutsche Bank believes that over $100 billion of derivatives abroad have been sold to speculators betting on the appreciation of the renminbi in the past two months.

Obviously, many of them are Chinese companies seeking to hedge dollar receivables.

, as Yang Sian Stevenson-Yang of J Capital Research said, China needs up to US $40 billion a month to maintain the normal operation of the system, so that capital inflow is better than printing money, because the former does not easily lead to inflation.

In fact, over the past year, government officials have been colluding in importing funds from the informal channels to China.

what we can not forget is that last year, the a href= "http://www.91se91.com/news/index_c.asp" > China's economy < /a > had already seen two shortages of funds, which occurred in June and December respectively. Therefore, in order to maintain economic growth, China's technocrats are unlikely to take measures to prevent them from entering inward in order to maintain their normal economic operation.

therefore, the whole world needs a more reasonable explanation of why China will force the renminbi to depreciate.

I think the reason why the central bank intervenes in the foreign exchange market is the same as in the past decades: improving the competitive edge of the exporters and domestic industries in the country.

The reason why the technocrats in the country are worried about their economic prospects is enough.

in fact, the news this year does not show strong growth.

For example, the manufacturing sector, which was measured by the HSBC Purchasing Managers Index, was shrinking in January, and the initial value of last month showed a further shrinkage.

In addition, producer prices fell 1.6% in January, down twenty-third consecutive months.

This is no doubt a sign of weakness in China's factory production.

the shrinkage of manufacturing industry indicates that the service industry will be in the doldrums, because many services are related to the pportation of manufacturing or goods, and the manufacturing of goods depends on the large demand of service industry, the construction industry.

In this regard, the rise in house prices in January and February has slowed down, and the market will probably slow down the growth of the construction market soon after it reaches the top.

we have not yet obtained the < a href= "http://www.91se91.com/news/index_c.asp" employment data < /a > in January or February, but the Ministry of human resources and social security has just released the survey report on 104 cities in the fourth quarter of last year.

The survey showed that the vacancies in the fourth quarter of 2013 decreased by 13.7% compared with a decrease of 3.3% over the same period last year.

This is almost an obvious sign of economic stagnation.

Lou Jiwei, Minister of finance, who was attending the G20 finance ministers meeting in Sydney last month, tried to calm the storm. He said that the depreciation of the RMB was within the normal range. He said that the fluctuation of the RMB was not a sign of weakness in the P.

After P, the fluctuation range of RMB exceeds the stipulated range.

The best explanation for manipulation is China's fear that its economy is now in a long-term downward trajectory.

There is no point in explaining why government officials are obviously panicking and are pushing the renminbi to depreciate sharply.