RMB Exchange Rate Reform And Pformation Of China'S Economic Development Mode

< p > < strong > RMB to us dollar exchange rate trend < /strong > /p >

< p > first, we must understand the historical trend of RMB to us dollar exchange rate.

What is the exchange rate? Generally speaking, there are three sets of concepts.

First, bilateral exchange rate and multilateral exchange rate.

The bilateral exchange rate refers to the exchange rate between one currency and another.

The multilateral exchange rate refers to the exchange rate between a currency and a variety of currencies, which is equal to the weighted average of several bilateral exchange rates calculated according to a certain weight, also known as effective exchange rate.

For example, during this period, the RMB depreciated against the US dollar, but it appreciated against the euro.

Therefore, the exchange rate can not only rely on the bilateral exchange rate, but also on the multilateral exchange rate.

Secondly, nominal exchange rate and real exchange rate.

The real exchange rate is the inflation adjusted exchange rate.

For example, in one year, the renminbi appreciated by 3% against the US dollar, and China's CPI growth rate was 5%, and the US CPI growth rate was 3%. In that year, the RMB appreciated by 3%+ (5%-3%) =5% against the real exchange rate of the US dollar.

Third, the equilibrium exchange rate and the exchange rate are high (low).

Equilibrium exchange rate is the exchange rate level that enables a country's economy to achieve internal and external equilibrium at the same time.

Internal balance means that the growth rate of output is above the level of potential growth. The external balance means that there is no significant imbalance in current account.

If the exchange rate of a country's currency is higher than the equilibrium exchange rate, the currency exchange rate of the country is overestimated. On the contrary, the currency exchange rate of the country is undervalued.

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< p > in the early days of reform and opening up, the yuan was once very valuable.

In 1981, 1 US dollars could only be exchanged for 1.7 or 1.8 yuan RMB. From 1981 to 1994, the RMB exchange rate against the US dollar continued to depreciate. Especially from the end of 1993 to the beginning of 1994, the value of RMB declined sharply. In December 1993, the exchange rate of RMB against the US dollar was 1:5.8. In January the next year was 1:8.7.

Many say that the devaluation of the renminbi has laid the foundation for China's export led development model.

However, since January 1, 1994 to the present 20 years, the RMB has continued to appreciate against the US dollar until the current 1:6.2.

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The trend of RMB exchange rate since the January 1994 P reform can be divided into three stages.

From the end of 1993 to early 1994, the exchange rate of RMB against the US dollar depreciated by 50%.

In the past, there was a market for official foreign exchange pactions, and there was a foreign exchange market on the ground.

Since 1994, we have also implemented the mandatory foreign exchange settlement system.

After receipt of foreign exchange, enterprises must sell to foreign exchange designated banks, that is, certain commercial banks, and commercial banks are sold to the central bank to form foreign exchange reserves.

After 1994, we formed the interbank foreign exchange market, which further formed the domestic market exchange rate.

The exchange reform has been pushed forward until 1998, interrupted by the outbreak of the financial crisis in Southeast Asia.

The central bank adopted a strategy of pegging the renminbi to the US dollar from 1998 to 2005.

Why did we once again peg the US dollar after the outbreak of the crisis? This is because the international financial crisis has broken down, external demand has shrunk and exports have declined. In order to stabilize export growth, the central bank has allowed its currency to be pegged to the US dollar.

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The second exchange reform in July 2005, P, is very similar to the last reform. It is to implement a regulated and managed floating exchange rate system based on market supply and demand and reference to a basket of currencies.

The exchange rate reform has a one-time appreciation, and the appreciation of RMB against the US dollar is 2% to 1 US dollars to 8.11 yuan.

The daily floating range of the RMB against the US dollar is limited to the upper and lower 3 per cent of the closing price of the previous trading day, and the non US dollar is floating within the range of 1.5%.

After the outbreak of the subprime crisis in 2008, the renminbi pegged to the US dollar for 2 years.

By June 2010, the central bank once again initiated the reform of the exchange rate system, further promoting the reform of the RMB exchange rate formation mechanism and enhancing the flexibility of RMB exchange rate.

Therefore, from 1994 to now, the aim of the central bank's exchange rate reform is consistent to increase the flexibility of the RMB exchange rate, so that the RMB exchange rate will be more determined by market supply and demand.

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< p > over the past 20 years, we can see that the result of the reform is basically the appreciation of the RMB against the US dollar, and the appreciation of the renminbi against the basket of currencies is about one hundred percent.

Will the renminbi continue to appreciate against the US dollar in the future? I think the long term unilateral appreciation cycle for the RMB against the US dollar is about to end.

According to my calculation, the mid point inflection point of the RMB against the US dollar is around 1:6.

This is not to say that the exchange rate will depreciate after 6, but that the two-way volatility will be even greater after 1:6.

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< p > < strong > RMB > a href= "http://www.91se91.com/news/index_cj.asp > > exchange rate < /a > the reason for reaching the top is < /strong > /p >

< p > why is the RMB going to be weaker or weaker than the US dollar in the future? From the interest rate level, the interest rate level of the US dollar has obviously decreased after 2007, and the interest rate of RMB has been rising.

The interest rate gap between the two countries is very large, which attracts many people to borrow money from abroad and pfer to China through various means, that is, cross border arbitrage.

Because many people buy Renminbi in China's foreign exchange market to sell US dollars, the dollar is oversupplied, thus lowering the US dollar exchange rate and pushing up the RMB exchange rate.

But the Federal Reserve announced last year that it would gradually withdraw from quantitative easing. According to the latest statement of its new chairman, the United States will start raising interest rates as early as June next year.

If the US raises interest rates and China's interest rates remain unchanged, it means that the interest rate differential between China and the US will shrink, so the strength of the RMB against the US dollar will gradually weaken.

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< p > medium term exchange rate changes, first of all, we should look at inflation.

Since the beginning of reform and opening up, most of China's inflation rate is higher than that of the United States.

Many times China's inflation rate is around 5%-6%, while the United States has only 3%-4%, which means that the purchasing power of the renminbi has dropped faster than that of the United States.

But how to explain the rise and fall of the renminbi? Actually, there are two kinds of exchange rates for the RMB against the US dollar. One is the market exchange rate as we all know, and the other is the equilibrium exchange rate, which is calculated strictly according to the purchasing power of the two currencies.

If China's inflation rate continues to be higher than that of the United States, the Yuan's purchasing power parity against the US dollar will depreciate.

If we use the data from the world bank, the purchasing power parity rate of RMB against the US dollar will be around 1:1 in 1981. Now it has reached about 4.5, which indicates that the RMB's purchasing power parity against the US dollar has depreciated over the past twenty years.

However, because the market exchange rate of the RMB against the US dollar has been lower than the purchasing power parity exchange rate for a long time, the former has gradually approached the latter, which has caused the so-called external appreciation.

Judging from the changes in the two exchange rates, they will sooner or later coincide.

If the two exchange rates coincide in the next two years, the appreciation of the RMB exchange rate may come to an end.

Market exchange rate and equilibrium exchange rate meet, which is what we want to achieve.

Since then, the RMB exchange rate has basically been determined by market supply and demand.

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< p > look at the future growth of labor productivity in China and the United States.

Over the past twenty years, China's labor productivity growth rate has continued to be higher than that of the United States.

But in the past five to ten years, China's labor productivity growth has dropped significantly due to the lack of structural reforms in China.

If there is another technological revolution in the United States in the next five years, its labour productivity will increase significantly.

If the structural pformation of China's economy can not be completed smoothly, the growth rate of labor productivity may continue to decline.

This means that the US labour productivity growth rate may exceed China in the next few years, which means that the RMB exchange rate against the US dollar may also weaken in the medium to long term.

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< p > if we take the short-term, medium-term and long-term factors into consideration, we can judge that the unilateral appreciation cycle of the RMB against the US dollar may end this year.

If the RMB exchange rate against the US dollar starts to strengthen again in the 2 quarter of this year, it may go to 1:6 near the end of this year, which may be a very important turning point.

Finally, from a policy perspective, the Chinese government may accelerate capital account liberalization in the next few years, and the risks of China's domestic financial system may become dominant.

The superposition of these two factors may lead to a large scale capital outflow, which will further promote the downward trend of the RMB against the US dollar.

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< p > < strong > < a > href= > http://www.91se91.com/news/index_cj.asp > > RMB > /a > the significance of economic restructuring.

< p > why RMB appreciation can promote China's economic structural reform? In other words, what problems will China bring to China if the RMB continues to be undervalued against the US dollar? First, it will lead to an external imbalance in China, that is, to increase the double surplus of the balance of payments, thus leading to the soaring foreign exchange reserves.

Our current foreign exchange reserves have risen to less than US $4 trillion from less than $500 billion ten years ago.

The rise in foreign exchange reserves may result in excess liquidity in the country, leading to asset price bubbles and inflation in China.

Frankly speaking, the surge in the domestic real estate market over the past ten years has a strong correlation with the undervaluation of the renminbi.

Second, the long-term undervalued RMB will lead to internal imbalance in China, that is, the development of manufacturing industry is excessive, and the development of service industry is seriously insufficient.

That is to say, the industrial structure will be unbalanced, and the imbalance of industrial structure will lead to a series of problems, such as the pressure of employment, the slow growth of residents' income, the shortage of domestic demand and the over reliance on investment.

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< p > because of the external imbalance caused by the undervaluation of the RMB, it has already resulted in four aspects.

First of all, the opportunity cost is too high. China is currently a net creditor abroad, with about 5 trillion overseas assets and 3 trillion overseas liabilities, that is, China has 2 trillion overseas net assets.

Nevertheless, China still pays interest every year.

On the one hand, China's foreign exchange assets exceed 4/5 are all foreign exchange reserves, while foreign exchange reserves exceed half of its investment in US Treasury bonds. The yield of us ten year bonds is 3% a year.

On the other hand, we have introduced a large number of foreign direct investment from the United States. The world bank and the American Chamber of Commerce have some regular anonymous surveys. The average annual yield of foreign investment enterprises in the United States is over 20%.

In other words, high foreign exchange reserves mean loss of national wealth.

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< p > second is exchange rate risk.

Our foreign exchange reserves amount to US $4 trillion and about 60% of US dollars are invested in US dollar assets.

The US dollar is depreciating against the renminbi.

Suppose the US dollar depreciated to RMB 10%, which means that China's foreign exchange reserves will lose 240 billion US dollars in local currency, almost 1 trillion and 500 billion yuan.

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< p > third is an investment problem.

So many foreign exchange reserves do not know where to invest, what to buy, what to go up, what to sell and what to fall.

The Chinese buy more oil to make strategic reserves, but they are caught up in the market by many people.

When China buys so many U.S. Treasury bonds, Americans say it's your risk, not mine.

Because even if we sell 1/10, the rest will depreciate significantly, which is killing one thousand of the enemy and nine hundred of ourselves.

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< p > finally, foreign exchange increased.

The accumulation of foreign exchange reserves of US $4 trillion is equivalent to the release of more than 20 trillion yuan of funds from the central bank to the market.

If the central bank does not write off, the rise in foreign exchange will lead to asset price inflation and inflation.

If the central bank is sterilized, the central bank will pay a larger write off cost.

If the central bank wants to write off and reduce costs, it will lead to distortions in the financial market, which is the root cause of the deposit reserve ratio of 20%.

Although the central bank has worked so hard, it is impossible to achieve one hundred percent sterilisation.

So why in the past 10 years, housing prices in all parts of China, especially in the first tier cities, have risen sharply, and the underlying reason is that the growth of base money is too fast.

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< p > domestic industrial structure imbalance is another important consequence of RMB exchange rate undervaluation.

At present, China makes global circulation, and the price of manufacturing industry is global price.

But the service industry, including catering, real estate and so on, can only be consumed in their own country, representing their own prices.

Therefore, the RMB exchange rate can also be regarded as the price of domestic service goods (non tradable goods) relative to domestic manufactured goods (Mao Yipin).

If the RMB exchange rate is undervalued, it means that service goods are cheaper than manufactured goods.

This will cause domestic enterprises to invest more resources in the manufacturing industry instead of the service industry, resulting in the excessive development of the manufacturing industry and the insufficient development of the service industry.

The direct consequence is that the share of capital reward remains high in the distribution of national income, and the share of labor remuneration is seriously insufficient.

The underdevelopment of the service industry will also significantly affect the consumption level of urban and rural residents.

Therefore, the imbalance of industrial structure is also an important reason for insufficient domestic consumption demand.

The excessive development of manufacturing industry and the slow growth of residents' remuneration will also result in a high proportion of G D P ratio and a low proportion of G D P ratio, which will have to rely on exports to digest excess capacity.

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< p > < strong > < a > href= > http://www.91se91.com/news/index_cj.asp > structural reform < /a > is imperative. < /strong > /p >

< p > from the macroeconomic point of view, China's economic growth has been very good in the past thirty years.

Over the past ten years, our economic growth has become more stable and the inflation rate has dropped significantly.

Compared with the 80s and 90s of last century, the government's macroeconomic regulation and control capability seems to have increased.

In terms of per capita income, the per capita income of Chinese residents was 1000 dollars in 2001, and exceeded 7000 US dollars in 2013, which has increased 6 times in 13 years.

However, the past successful experience may not succeed in the future. After World War II, many economies completed the growth of per capita income from one thousand US dollars to US $five thousand or six thousand, and succeeded in becoming a middle-income country from low income countries.

However, only 13 economies have completed the leap of per capita income from $five thousand or six thousand to $15 thousand, while other countries have been trapped in the middle-income trap.

The challenge of China's middle-income trap has just begun.

Whether China can push forward structural reform in the next ten years determines whether we can turn from middle-income countries to developed countries.

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< p > Why did you expect so much of the third plenary session last year? The growth of China's G D P in the past is less than 8% every time, and there will be a great institutional change. The first is the reform of the joint responsibility system and the decentralization of the city. The second is the establishment of a socialistic market economy system by Xiaoping's South inspection and the 14th National Congress, and the third is to join WT O in 2001.

At present, we need a big structural reform to reshape the power of China's economic growth.

As far as my research is concerned, there are three most important reforms for China in the future.

First, increase the proportion of residents' income to national income and reduce the proportion of government revenue and corporate profits to national income. China's economy can be changed from investment and export drive to domestic demand drive.

The policy proposal is simple. First of all, the government reduces the tax burden on residents. But now we all know that the situation is developing in the opposite direction.

The second is to increase the proportion of state-owned enterprises paying dividends, and use the dividends of state-owned enterprises to enrich the social security fund.

Third, we should realize the marketization of deposit interest rate as soon as possible.

The low interest rate of deposits is actually a hidden tax on the common people, which subsidize the main borrowers, namely, local governments and state-owned enterprises.

The second is to break the monopoly of state-owned enterprises on certain service sectors, and open these sectors to private capital as soon as possible, such as finance, telecommunications, railways, education, health care, and pension.

Some say that the opening of these sectors will jeopardize the interests of the state.

In the developed countries, many national economic lifeline industries are fully open to the private sector, but we know that this is very difficult.

The third one is to achieve the marketization of domestic factor prices as soon as possible, including land, resources, environment, hydropower, oil and coal pportation, RMB interest rate and exchange rate.

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