Niu Wenxin: How To Judge RMB'S Strength And Weakness

During the "two sessions", Mr. Yi, a member of the CPPCC, told the media that he said: "the dollar has recently been the strongest currency, and the RMB is followed."

Some even simply interpreted this as "the renminbi is a strong currency after the US dollar".

I think this formulation is neither scientific nor accurate.

I think Yi Gang expresses only the strength of the exchange rate trend, rather than the strength of the currency.

If our important financial executives only judge the strength of the currency by exchange rate movements, it will make people laugh and make the world laugh.

What is a strong currency? I think the core is the currency's right of valuation and settlement, not just the recognition of the world's governments.

The strength of the US dollar lies in: first, pricing international commodities.

Because of this pricing power, the monetary policy of the United States can control the price of commodity and affect the monetary policy of all countries in the world.

Second, for international commodity trading settlement.

So far, more than 60% of the currency used by the international commodity exchanges is the US dollar, which has led the non US currency countries to "reserve" US dollars, even the so-called "international hard currency" countries such as Europe and Japan, thus bringing a lot of "seigniorage" income to the United States.

Is the renminbi stronger than the euro and yen? We can see that oil prices and quotations from individual Middle East countries have begun to partially accept the euro and yen, and are they equally accepting the renminbi?

From the point of view of international reserves, IMF released the data released in the three quarter of last year, which shows that the euro accounts for 23% of the central bank's reserves in the world, while the Japanese yen and the British pound account for 4%. However, the central bank's reserve RMB of that country has just one or two small African countries' central banks trying to put the renminbi in the foreign exchange reserve, and there is still tremendous resistance.

From the point of view of international trade settlement, although the amount of RMB used in China is increasing rapidly, the proportion of RMB in the whole international trade is not the same, but it is better than nothing.

More importantly, systemic monetary strategy.

Needless to say, it is a far cry from Europe, Japan and Britain to compete with the United States.

Based on the above, I do not understand that the renminbi is second only to the us strong currency.

I do not belittle the renminbi, nor do I mean to depreciate the renminbi.

The key question is whether we need to be arrogant blindly and whether it is necessary to convey the wrong information to the world. I think the internationalization of the renminbi has just started. It is unnecessary to say how far away from the old strong currencies such as the US dollar, euro, yen, pound and so on. That is, compared with the currencies which are not widely publicized, such as the Australian dollar, the Canadian dollar and the Swiss franc, our gap is also very huge, even less than that of Brazil.

Because Australia, Canada and Brazil are all countries with abundant natural resources. Other countries can reserve such currencies at least to buy large amounts of natural resources.

My question is: what do other countries get from the renminbi to buy in China?

We have been saying that China has indeed become

Big country, but not a powerful trade nation.

To see the history of money, that strong currency country is not going to be a trade power first? So, since China is not a trade power and a powerful currency power, we must first become a trading power. This is probably the right way. Otherwise, the internationalization of RMB will be different from the tower on the sand. Sooner or later, it will happen.

Our officials are too fond of bragging about what they have done, but the internationalization of RMB is better than bragging.

This is not a personal task, but a national strategy.

Since it is a national strategy, individuals are less likely to blow.

Moreover, the internationalization of RMB is not a blow, it needs a solid comprehensive national strength.

In my opinion,

Internationalization is a natural process, which is of little significance to China for a long time in the future.

Because we can not earn "seigniorage", we can not get the right of valuation and settlement, and the only meaning is to promote the free convertibility of RMB.

In fact, this is exactly what the economic opponents of the United States and others are willing to see.

Why do our economic policies always develop in the direction of the US? This is good for China? I doubt it.

Because I have never seen it in the history of human economy.

Therefore, I urge China's financial executives to work quietly, vigorously promote China's capital formation, and vigorously promote the healthy development of the real economy, instead of impetuosity, and let the internationalization of RMB become more natural and market-oriented.

We see the fact that the Germans insist on industry from beginning to end and remain invincible throughout the financial crisis.