Exchange Rate Coordination And Dispute Over RMB Rise And Fall

How to mitigate the impact of exchange rate fluctuations and promote global economic development has also become a worldwide issue.

At the recent meeting of the finance ministers of the group of 20 (G20), the exchange rate issue returned to the agenda.

Cui Jionghuan, South Korean finance minister, said recently that because of the increasing volatility of foreign exchange markets, such as the multi currency policy of various countries, it is expected that G20 will emphasize the exchange rate "coordination" in the communiques after the meeting, avoiding competition and derogation, and echoing the commitments made at the Moscow summit in July last year.

However, although the original intention is to make efforts for the development of the global economy, this exchange rate "coordination" can not be smooth sailing.

Exchange rate "coordination" is difficult.

"When a country's economic growth is too slow, the standard short-term solution is to increase government spending, reduce taxes or cut interest rates.

But if all of this is not feasible, the government will usually improve its export competitiveness by lowering its local currency.

David Wessel, director of the financial and monetary policy center at Brookings Institution, said (David Wessel).

Recently, most emerging economies including China, Japan, Germany and other countries have encountered growth resistance, coupled with tension in some areas, and the global economic outlook is not optimistic.

Recently, the International Monetary Fund (IMF) released a report that the growing tension in Ukraine and the Middle East has worsened the global economic outlook.

The growth prospects of emerging markets are still vulnerable to the normalization of US monetary policy.

IMF also said that the economic growth of the developed countries will accelerate, and the recovery of the US and the UK is strongest. However, the prospects of the euro area and Japan are uncertain.

Although the global economic recovery is expected to resume some time in the rest of this year and next year, the recovery will not be as strong as this spring forecast.

The The Organization for Economic Cooperation and Development has also lowered the economic growth expectations of the United States and other major economies. Meanwhile, the continued weakness of the economic recovery shows that economic policies should be drastically adjusted.

Morgan Stanley's latest global strategy outlook, titled "investing in an asynchronous world", points out that the world's large economies are different and are in different stages of the monetary policy cycle.

The most striking difference is between the United States and Europe.

The Fed is about to stop QE altogether, while Delagi Gon, the European central bank governor, has announced that the new asset purchase program will even expand.

The difference is huge.

Japan has been implementing Andouble economics for some time, but it may be overweight on loose monetary policy.

Because all economies do not have economic prosperity at the same time, global expansion will last longer rather than overheating.

Based on different economic situations, countries choose different economic policies to deal with. This is the manifestation of the autonomy of national economic policies.

In 1976, the "Jamaica agreement" and "the second amendment to the constitution of the International Monetary Fund" confirmed the validity of the floating exchange rate and the collapse of the Bretton Woods system, the US dollar centered international monetary system.

In the era of post Bretton Woods system, floating exchange rate is the general trend. Floating exchange rate system is conducive to the autonomy of all countries' economic policies. But at the same time, there are also deficiencies. For example, the floating exchange rate lacks the institutionalized exchange rate coordination mechanism, which can easily lead to competitive depreciation and even lead to currency wars.

In the context of economic globalization and integration, each country faces the problem of how to gradually open up the financial sector so as to promote its economy to gain greater interests in the tide of economic globalization. Every country is also faced with the problem of how to gradually open up the financial sector so as to promote the domestic economy to gain greater interests in the tide of economic globalization.

In fact, it is also destined that exchange rate "coordination" is not easy.

Tang Jianwei, senior macroeconomic analyst at the Bank of communications Financial Research Center, told China Daily News that global integration is becoming more and more closely related. The monetary adjustment of the world's major economies will have a great impact on the world, especially the premature increase in interest rates will have a negative impact on the global economy, so this needs coordination, but this coordination has always been difficult.

"Exchange rate coordination and policy coordination are the same. At present, there are policy differentiation trends in different global economies, including developed economies and emerging economies. The economic situation in different economies is different and the situation is different. More often than not, policies are adjusted according to their domestic economic situation.

After all, all countries first consider their own domestic situation. "

In addition, it is worth noting that in order to eliminate the exchange rate fluctuations, the European Union countries create a unified regional currency, the establishment of the euro zone, and the euro area has also become the highest level of the people's heart rate of exchange rate, that is, the unified currency.

However, more than 10 years later, the most successful exchange rate coordination mechanism in the past has also exposed many problems.

"This financial crisis has also seen that there are structural problems in the euro area. The big problem is that the financial system is not unified, and the degree of development of different economies is different.

Therefore, in the case of the ideology of a sovereign state, including all countries being completely independent, it is difficult to have a unified exchange rate coordination mechanism in the world.

Gao Liankui, director of the world economic project of Chongyang Finance Research Institute, also agrees with the above views. It said in an interview with reporters: if countries fail to agree on the theoretical basis of policy making, then the policy will inevitably conflict, and this conflict is difficult to coordinate.

If G20 conference does not talk about theory, only talk about interests or policy coordination can not produce results.

Whereas

The concern about exchange rate fluctuations is that the RMB exchange rate has also attracted wide attention, and the market has not stopped discussing the valuation of the renminbi.

It is reported that recently, Bloomberg pointed out that the current level of the central parity of RMB against the US dollar has been overvalued by nearly 20%, while the Holland Cooperation Bank also reported in June 4th that the RMB exchange rate is still overvalued by about 10%.

The International Monetary Fund said that the RMB exchange rate was undervalued by 5% to 10% when issuing the external economic reports of major countries in the world.

In view of this, there are differences in the views of the industry. Some analysts point out that the RMB is overvalued and has many negative effects on the Chinese economy. The RMB should be devalued to some extent.

After a period of devaluation, the RMB began to rebound steadily since May, and the central parity of RMB against the US dollar has been constantly updated.

After the release of trade data in August, the central parity of RMB against the US dollar rose by 95 basis points in September 10th, which was 6.1425.

Experts said that the current exchange rate volatility is a normal phenomenon, is a reflection of market demand, at present, the valuation of the RMB exchange rate is basically reasonable, and will continue to show two-way fluctuations in the future trend.

Louis Kuijs and Tiffany Qiu, an economist at RBS in Scotland, have said in a report that in the longer term, the renminbi will show an appreciation trend, reflecting China's productivity growth faster than its trading partners and the relative price rise resulting from it.

For the near future

Appreciation, analysts pointed out that in recent months, the important driving force behind the appreciation of the renminbi is the huge increase in the trade surplus.

In fact, in the past four months, the General Administration of Customs has released a relatively high trade surplus. The latest trade figures in August showed that China's exports grew by 9.4% over the same period in August, and that of imports dropped by 2.4% compared with the same period last year. The trade surplus was 49 billion 830 million US dollars, a record high for second consecutive months.

Some experts predict that by 2015 this year, exports will continue to moderate recovery and imports will remain weak, so the trade surplus will probably remain relatively high.

In fact, the appreciation or depreciation of the renminbi ultimately depends on the future development of China's economy.

Gao Liankui pointed out that China's exchange rate depends on the development of the economy and other countries' monetary policies, especially the exchange rate policy of the US dollar, but fundamentally depends on the economic situation of our country.

Tang Jianwei also agreed with him. He put forward two points on the RMB exchange rate, one is "no" to depreciate, and the renminbi will not depreciate under the condition of favorable balance; the two is, "can not" depreciate. Under the background of RMB internationalization, the renminbi can not be depreciated.

So in his view, the Chinese economy will maintain a sustained and stable growth and the renminbi will remain a strong position.