The Renminbi Will Not Depreciate Sharply, Focusing On The Independence Of Monetary Policy.

Why do we need to expand the floating rate of RMB against the US dollar in the foreign exchange market? A spokesman for the central bank explained: "exchange rate as an important price in the factor market is one of the decisive factors in the effective allocation of domestic and international resources. Expanding the floating rate of the RMB exchange rate is conducive to enhancing the floating elasticity of the RMB exchange rate, constantly optimizing the efficiency of capital allocation, further enhancing the decisive role of market allocation of resources, and accelerating the transformation of economic development mode and structural adjustment. In recent years, the development of China's foreign exchange market has further matured, the volume of transactions has continued to grow, the types of transactions have been increasing, the ability of trading entities to control risks has gradually increased, and the willingness to make independent pricing has increased. "

"This means that the central bank has recognized the importance of the exchange rate for the allocation of resources, and has raised the floating exchange rate to the level of macroeconomic regulation. This indicates that the reform is a comprehensive and strategic arrangement and arrangement, and is not a general daily policy change," said Liu Dongliang, a senior analyst at China Merchants Bank's financial market department. "

Xie Yaxuan, director of macroeconomic research at China Merchants Securities Research and development center, pointed out that the further expansion of the RMB exchange rate volatility by the central bank is intended to enhance the effectiveness of monetary policy. "According to the impossible triangle theory, the effectiveness of monetary policy has an alternative relationship with capital free flow and exchange rate fluctuations. The central bank further expands the fluctuation of the RMB exchange rate, hoping to reduce its intervention in the foreign exchange market. "The central bank basically quit normal foreign exchange intervention", and gradually get rid of the mode of relying on foreign exchange to supply the basic currency, so as to enhance the effectiveness of domestic monetary policy. "

For the next reform, the central bank spokesman said, "to further play the role of market exchange rate, the central bank basically quit normal foreign exchange intervention and established a managed floating exchange rate system based on market supply and demand." "

Liu Dongliang pointed out that this means that the central bank will abandon the goal of maintaining exchange rate stability and agree to gradually transfer the pricing power to the main body of the market, that is, the central bank will abandon the "mandatory pricing" for the RMB exchange rate, and the market will determine the exchange rate more, which means that the central bank's policy focus will shift to the implementation of monetary policy in the future.

"With the increase of exchange rate risk, cross-border arbitrage funds are expected to decrease. If the central bank quit normal intervention, it will also reduce foreign exchange reserves. In this sense, liquidity supply tends to tighten, and the short term is conducive to the implementation of tight monetary policy by the central bank. We think this is the result that the central bank hopes to see and the independence of monetary policy will also be maintained. "Liu Dongliang said," but in the medium to long term, capital inflow and outflow may be strongly affected by the exchange rate fluctuations, thereby increasing the impact of capital flows on the domestic economy. It is expected that the central bank will rely more on regulating liquidity through open market operations, and even the future does not exclude the way to start buying and selling Treasury bonds. "

"The change in the RMB exchange rate depends mainly on the supply and demand of foreign exchange based on the balance of payments. "The central bank spokesman said," in 2013, the ratio of China's current account surplus to GDP has dropped to 2.1%, the balance of payments has tended to be balanced, and the RMB exchange rate does not exist on the basis of substantial appreciation. "

Wang Tao, chief economist of UBS Securities, said that the renminbi is unlikely to continue to appreciate this year. "From the economic fundamentals, there is no underestimation of the RMB. In 2013, China's current account surplus decreased from 10% in 2007 to 2.1% in GDP. If the part of capital inflows, which is hidden in trade activities, is adjusted, the proportion will be even lower. Considering the high savings rate in China, this indicates that the RMB exchange rate has basically been at a fair level. Although RMB has been facing appreciation pressure in the past period, this is mainly caused by a significant spread between offshore and offshore markets, attracting large amount of foreign exchange arbitrage capital. In view of the relatively weak export performance in the near future, we believe that the renminbi will not continue to appreciate this year. "

A spokesman for the central bank also said: "China's financial and financial risks are controllable. foreign exchange reserve The ability to resist external shocks is strong and the RMB exchange rate does not exist on the basis of significant depreciation. "

Xie Yaxuan believes that the probability of significant depreciation of the RMB exchange rate is low. The main reasons include: "first, China's savings rate determines that the current account surplus has a certain degree of continuity, which can, to a certain extent, hedge against the impact of international capital flows under capital and financial items, and balance foreign exchange supply and demand. Secondly, according to the China international investment position table released in 2013 at the end of 9, according to the State Administration of foreign exchange, China's foreign financial assets amounted to 56510 billion US dollars, external liabilities amounted to 38459 billion US dollars, and foreign financial net assets amounted to 18052 billion US dollars. China is a net creditor country, rather than a net debtor country. Even if we repay all foreign debts, we still hold foreign net debt, which is different from the Southeast Asian countries before the Asian financial crisis in 1997, and also different from the South American countries such as Brazil and Argentina, which have high external debt. Third, the central bank has not yet given up the practice of stabilizing and regulating the exchange rate through the middle price when necessary. In addition, the central bank is not totally laissez faire. exchange rate Fluctuations. If the exchange rate fluctuates exceptions, the people's Bank of China will also implement the necessary regulation and management to maintain the normal fluctuation of the RMB exchange rate. "

Lu Zheng commissar, chief economist of Industrial Bank, believes that a significant depreciation of the renminbi is not necessarily a bad thing. "The authorities have always believed that the continued depreciation of the renminbi may lead to a further look at China's voice. The actual situation may be just the opposite. If the renminbi depreciates significantly, it will eventually make the outside world see more China because of the improvement of aggregate demand. "

"We expect that in the next 1 to 2 quarters, the RMB exchange rate will show an oscillatory state. For enterprises that need to avoid risks, this state is more advantageous to exchange rate option trading. "The political commissar said," with the second half of this year, China's economic rebound is expected to re ignite. It is expected that the central parity of the last trading day at the end of last year will see a slight appreciation in the whole year. "

Liu Dongliang pointed out that "considering that China's economy will continue to grow at a faster pace, labor productivity will also increase at a faster pace and the trade surplus will continue, so in the long run, RMB Continued appreciation is still a probability event.