The Central Bank Aims To Reduce The Non Market Behavior Of Cross Border Arbitrage Spreads.

Compared to last year's RMB appreciation of 2.9%, P has swallowed up more than 90% of last year's total price in the first quarter of this year, falling below 6.2, and may trigger a sell-off in the foreign exchange market.

Some institutional investors are pessimistic about the expectation of depreciation, while others maintain the judgment of "breaking six to five", and firmly believe that the recent devaluation of the renminbi under the control of key areas of capital projects is a non market behavior of the central bank aimed at reducing the spread of cross-border arbitrage.

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< p > however, the current depreciation of RMB is based on endogenous economic factors, such as the weakening of economic cycle and the rise of domestic credit risk exposure. The central bank is likely to be "wronged" by the market again.

Recently, the attitude of the central bank to the RMB exchange rate is likely to be a smooth sailing.

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< p > in fact, only the analysis of the depreciation of RMB, which is mainly driven by the onshore market, has shown signs of a turning point in the trend of RMB.

As of March 31st, the offshore RMB market and the offshore market were almost the same.

In view of the fact that < a href= "http://www.91se91.com/news/index_cj.asp" > capital account /a > key areas control, and RMB offshore market with typical government led constructive features, it has virtually set up a "wall of iron" firewall in the offshore market, and at the same time, the weak offshore market has limited influence on the RMB exchange rate trend.

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< p > the current trend of RMB devaluation triggered by the current round of the offshore market, if combined with the risk sensitivity of the domestic debt market triggered by the super Japanese debt default, the financial repression such as domestic interest rate control, the impact of Internet Financial on financial repression, and the weakness of the RMB assets market such as the domestic housing market, and so on, will be more explanatory power by using the market's self correction to depreciate the RMB in recent years.

Because the depreciation of the RMB in the onshore market shows that the market shows a significant risk aversion to the RMB assets, and this hedging demand is constrained by interest rate control and so on. It is difficult to adjust the interest rate exposure and debt restructuring to cover the already highlighted risk exposure. Then the market investors have to reverse the depreciation of the renminbi to release the market risk appetite, that is, the depreciation of the RMB in the shore market guidance, which is actually a signal that the market has sent a crack to the domestic credit risk to investors.

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< p > to clarify this phenomenon, we need to start with the basic aspects of < a href= "http://www.91se91.com/news/index_cj.asp" > China's economic cycle < /a >.

Before the financial crisis, the Chinese economy enjoying the bonus of W TO was on the rise. The RMB deviated from the market equilibrium in an underestimation way, which eventually led the market to write off the gap of the exchange rate from the equilibrium state in the Renminbi (i.e. inflation).

After the global financial crisis, China's internal and external needs have dropped markedly. The government has launched a huge stimulus plan for the growth of the economy. Because of the investment driven over the past five years, a large number of economic and financial resources have been allocated to inefficient or even invalid assets. The central government has pferred more debt obligations to local and state-owned enterprises in order to control explicit liabilities, so that the liabilities of Chinese companies during this period are almost out of control.

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< p > > according to the data of < a href= "http://www.91se91.com/news/index_cj.asp" > "Bank of International Settlements" < /a >, the debt leverage ratio of Chinese enterprises has surpassed all developed countries and developed countries such as the United States, Europe and Japan in 2012, which is close to 200% of GD P; and after the painful deleveraging of the US enterprises from 2008 to 2011, the enterprises began to increase their leverage automatically in 2012. The EU began to leverage from the second half of 2009, and it stabilized until last year, and Japan began to leverage from 1992 to 2009 after 20 years of deleveraging.

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< p > obviously, under the pressure of internal and external needs, China's leverage has led to almost all industries facing overcapacity in the past five years, and has continued to drive down China's endogenous economic output and marginal return on investment.

The decline in marginal returns and the continuing debt tightening and credit crunch brought by the high public and private sector debt caused China to depreciate (inflation) from the RMB since 2009. It has obvious socialized dispersion characteristics of debt cost, that is, since 2009, inflation has mainly led to the high economic operation cost caused by the rise of public utility prices or hidden or obvious rising prices and the soaring bubble of housing prices, which shows the typical characteristics of debt conduction, and this debt pmission is weak due to the slow growth of real wages and the gradual decline of the total retail sales of consumer goods.

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< p > this is ultimately reflected in the RMB exchange rate. Once inflation shows a marginal diminishing character, interest rate control and other financial repression policies also contain a channel for easing the exposure of RMB assets. With the economic downturn, debt tightening and credit risk, the exchange rate of RMB against the US dollar is finally lowered by the onshore market's risk aversion to RMB assets.

If last year's domestic economic implicitly increased leverage, the "shortage of money" that occurred in June without shortage of money, and the current economic downturn and real credit tightening liquidity in the market, could be offset against the depreciation of the renminbi on shore.

This seems to reflect that the current depreciation of the renminbi will not be a short-term phenomenon.

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