RMB Depreciation Is The Three Major Reform Obstacle In The Year

< p > Li Keqiang, premier of the State Council, made a report on the government work done at the two session of the twelve National People's Congress on 5 th, and put forward that we should continue to advance the interest rate marketization and expand the independent pricing right of financial institutions.

We should maintain the basic stability of the RMB exchange rate at a reasonable and balanced level, expand the two-way floating rate of exchange rates, and promote the convertibility of Renminbi capital items.

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< p > RMB exchange rate < a href= "http://www.91se91.com/news/index_cj.asp" > two-way volatility < /a > opening will open space for the three major reforms of exchange rate, interest rate and capital account convertibility.

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< p > first, in terms of exchange rate reform, the intra day volatility of the RMB exchange rate has expanded from 5/1000 to one percent. It is expected that this year's two-way volatility will gradually evolve to enhance exchange rate flexibility and expand the floating range.

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< p > since September 2012, the closing price of the spot price of RMB against the US dollar has always been higher than the middle price.

However, the closing price of the spot price of RMB against the US dollar in from February 25th to 28th has been lower than the middle price for four consecutive days.

Although the volatility of the RMB exchange rate is not up to 1%, the expansion of the floating range can more effectively reflect the market supply and demand, and is conducive to further playing the role of market forces in determining the price of the intermediate price under the premise that the pricing mechanism of the intermediate price is unchanged.

It is expected that the central bank will adopt a strategy of "small step and fast run", and the floating range of RMB exchange rate will be expanded orderly in the year.

Expanding the fluctuation range of RMB exchange rate is also conducive to the cultivation of exchange rate risk awareness among residents, enterprises and banks. It is conducive to further expanding the depth and breadth of China's financial market for the purpose of creating and developing external demand for all kinds of financial derivatives related to exchange rate.

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< p > secondly, the elasticity of RMB < a href= "http://www.91se91.com/news/index_cj.asp" > /a > elasticity gradually enhances the interest rate liberalization.

The marketization of RMB loan interest rate has basically been completed, and the marketization of deposit interest rate has entered a critical stage.

After the withdrawal of large negotiable certificates of deposit, the floating rate of RMB deposit interest rate will gradually expand.

Although it is difficult to determine whether the deposit interest rate will go up in the year, the market for all kinds of deposit substitutes will be further deepened.

These products will push up the domestic real interest rate level, and to a certain extent, increase the impact of interest rate fluctuations on financial institutions.

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< p > RMB a href= "http://www.91se91.com/news/index_cj.asp" > interest rate marketization < /a > reform and exchange rate reform are mutually supportive relations.

Cross border capital flows are very sensitive to changes in deposit interest rates.

If the RMB exchange rate is not balanced, the interest rate liberalization will be promoted.

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< p > in the case of little change in the RMB exchange rate, this will inevitably cause the corresponding fluctuation of interest rate, which is not conducive to the smooth reform of interest rate marketization reform.

When the elasticity of RMB exchange rate gradually increases, the impact of capital going forward to the domestic market will gradually weaken, which will help create a better environment for interest rate policy.

Therefore, when the RMB exchange rate elasticity is gradually strengthened, the central bank will speed up the marketization of interest rates in an orderly way.

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< p > again, the two-way fluctuation of the RMB exchange rate helps to pave the way for accelerating capital account convertibility this year.

It is expected that the cross-border use of RMB will intensify this year, and promote the facilitation of foreign trade investment, from the promotion of inflow to the promotion of inflow and outflow.

To accelerate the capital account convertibility will impact China's financial market order and even affect economic security, which has always been one of the important obstacles affecting the reform process.

The main reason for these concerns is that the domestic exchange rate reform has not yet been completed.

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On the one hand, the implementation of quantitative easing policy by the Central Bank of the developed countries has not ended. On the one hand, once China's capital account is opened up, it is likely that it will face large scale short-term capital inflows first.

With the US gradually reducing the scale of quantitative easing and stepping into the new interest rate cycle, China is likely to face large-scale short-term capital outflows.

Short term capital expansion will seriously damage China's macroeconomic order and financial market stability.

When the RMB exchange rate elasticity gradually increases, the appreciation of the renminbi is expected to plate into a real appreciation of the renminbi, thereby rapidly eliminating the expected appreciation of the renminbi.

Vice versa, the devaluation of the renminbi is expected to plate into a real depreciation of the renminbi, thus rapidly eliminating the expected devaluation of the renminbi and ultimately reducing the possibility of large capital growth and reducing the worries of RMB capital account convertibility.

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