RMB Exchange Rate Depreciation Risk Countermeasures

The era of P appreciation is likely to be gone forever. The expectation of the financial market for the future direction of RMB is not clear.

At present, we have to judge whether the renminbi will appreciate slightly or concussion in the future, or start the stage and trend devaluation.

This problem is actually a game between the three parties of the people's Bank of China, foreign capital and domestic capital, which are built on the fundamentals of China's economy.

The goal of the central bank is to maintain a stable currency and balance of payments. Excessive appreciation hurts exports. Large devaluation triggering huge financial turbulence; foreign funds seek higher returns; and domestic funds seek safer asset allocation.

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< p > < strong > the factor that affects the exchange rate of < a href= > http://www.91se91.com/news/index_cj.asp > RMB > /a > short term spreads may be narrowed down to < /strong > > http://www.91se91.com/news/index_cj.asp > > a href= > http://www.91se91.com/news/index_cj.asp > > risk adjusted < /a >.

< p > spreads between China and the United States are the key to decide the flow of arbitrage capital.

Spreads and appreciation of the renminbi constitute the proceeds of arbitrage capital, and spreads are the reason, and the appreciation of the renminbi is the result.

In fact, the interest rate spreads between China and the United States have been expanding since 2007. On the one hand, the Federal Reserve's quantitative easing (QE) continues to increase. On the other hand, China's interest rate liberalization leads to the return of interest rates to the equilibrium interest rate.

It is especially noteworthy that this has not changed even in the second half of 2013, when a href= "http://www.91se91.com/news/index_cj.asp" > QE < /a > Exit expectations were strengthened.

In any case, the nominal GDP growth rate of a country is 9.5%, and the nominal GDP growth rate of another country is 4%. There is a considerable gap between the two countries' equilibrium interest rates.

From the perspective of future changes, although China will maintain a positive spread relative to the United States, there are two factors that are not conducive to maintaining the interest rate gap between China and the United States.

On the one hand, China may face greater deflationary pressure, making China's nominal GDP further downward. In the 2010~2013 years, the nominal GDP growth rate of China has dropped from 18% to 9.5%, and in 2014 it is likely to further decline to 9%.

On the other hand, the Chinese government is gradually breaking the rigid payment, raising the credit risk premium, and the risk adjusted interest rate may be narrowed.

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< p > < strong > see surplus in the medium term - narrowing the trade surplus with the US > /strong > /p >

< p > from the perspective of trade surplus, the RMB market is expected to be in a state of differentiation after the subprime crisis. The appreciation of the RMB against the US dollar in essence corresponds to the Sino US trade surplus rather than China's Global trade surplus.

Over the past 20 years, China has a surplus of US $16700 billion, a surplus of US $230 billion to non US countries and regions.

In the past 20 years, China's surplus to the United States has expanded year by year. The surplus of non US countries and regions fell down in 2008, and a deficit of 45 billion US dollars in 2011. In the next 10 years, the balance or deficit will be achieved for non US countries and regional trade.

Against the backdrop of no downward trend in the US surplus, the best currency strategy is relative to the US dollar appreciation and relative non US basket stability, and fluctuates with global risk.

In March 2014, the central bank expanded the bilateral fluctuation of RMB from 1% to 2%, which is an important step on the path of RMB internationalization. However, under the US dollar intermediate price system, the RMB exchange rate system can not achieve the best.

At present, the biggest problem is not the rise and fall, but the change of the intermediate price system and the acceleration of RMB internationalization.

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< p > China's trade surplus with the United States peaked at 170 billion 800 million US dollars in 2008, and dropped to 143 billion 400 million US dollars in 2009. It reached a record high of 219 billion 100 million US dollars in 2012 and dropped to 215 billion 900 million US dollars in 2013. This may be a downward trend.

In the first 2 months of 2014, China's surplus to the United States was only 25 billion 500 million US dollars, far below the 30 billion US dollars in the same period in 2013.

The US economic recovery will focus on rebalancing economic growth, and the US trade deficit will only shrink and not expand. Then China's surplus to the US is likely to shrink in the next 2~3 years.

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< p > < strong > long term force difference the dual pressure of system and technological innovation < /strong > /p >

"P > exchange rate in the long run depends on the difference in the growth rate of labor productivity between the two countries, that is, the difference in the total factor productivity (TFP) between the two countries. This is the result of the standard open macroeconomics.

The main source of China's economic growth in the past 30 years is capital accumulation and demographic dividend. As Krugman's theory in the "miracle of East Asia" illustrates, China's TFP growth has limited contribution to economic growth.

Looking forward to the next 2~3 years, China is faced with dual pressures of institutional and technological innovation. The gap between China and the United States in labor productivity growth may remain unchanged, and it is difficult to achieve substantial narrowing.

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