Barclays: The RMB Exchange Rate Is Overvalued By Nearly 20%.

On Friday (March 27th), in the early morning of the Asian market, Barclays analyst Jose Wynne and others said in a quarterly bulletin issued on the 26 day that when the dollar was strong, to avoid a substantial rise in the real effective exchange rate (REER) of the RMB, it was estimated that

The US dollar will be allowed to be on shore.

The Barclays report pointed out that the recent situation shows that China's need to maintain a strong currency, especially the strong trade weighted exchange rate, has been reduced.

Inflation is not a worry.

Rising, and research shows that exchange rate has an important impact on China's inflation rate.

The bank report continues to point out that

The overvaluation of the exchange rate is extremely serious, and the bank's model estimates that the RMB is overvalued by about 20%.

The report believes that China's intervention in the exchange rate to curb the depreciation of the renminbi will weaken the effect of liquidity easing policy.

The recent rise in the REER of the renminbi may drag China's exports to other countries outside the United States.

In addition, China's official statement shows that it is not worried about capital outflows.

Barclays report finally said that the US dollar should be estimated at 6.40 at the end of 2015.

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HSBC's PMI initial value has dropped to 11 new lows, while the National Bureau of statistics's 1-2 month economic data is far less than market expectations.

That is to say, since the second half of last year, although the government has launched a series of rescue policies, it is hoped that these policies will ensure the stability of economic growth, but the result is not so ideal.

Especially in the real estate market, the central and local governments' bailout policies have introduced a string of strings, but A Dou, who can not afford the domestic real estate market, is still failing.

If the volume and price of the real estate market is down and the total investment in real estate is decreasing, it is very difficult for the domestic economy to rise and the overcapacity to be solved.

The domestic economy has lost the support of the property bubble. The domestic government has to play the "bull market" like the United States, Japan and the European Central Bank, hoping to stabilize the domestic economy by supporting the stock market.

It can be seen that after the financial crisis in the second half of 2008, the United States adopted a round of quantitative easing monetary policy to inject nearly $4 trillion into the market, thus making the US stock market more than 3 times higher.

The US economy is also recovering from this process, and finally out of the predicament of recession.

Similarly, Japan began to implement monetary policy with wide and wide quality in the first half of 2013, and also injected a lot of liquidity into the market. The Nikkei index of Japanese stock market also rose by nearly 20 thousand points from more than 8000 points.

In this process, the Japanese economy has begun to get out of the dilemma of negative growth, and deflation has begun to withdraw.

For China, the previous round of economic growth and prosperity, with nearly 60 trillion of the financing, has created a huge real estate bubble.

Despite the rapid growth of China's GDP and the appreciation of the Renminbi for more than 40% of the rest of the world, China's economy has been squeezed into the second largest economies of the world. However, this huge bubble has not been sustainable.

60 trillion of the liabilities not only cause huge financial risks to China's economy, but also lead to serious overproduction of housing and other industries.

If the domestic real estate market price does not appear comprehensive adjustment, if the domestic real estate market price does not return to reason and let the domestic residents' housing consumption demand release, then the domestic real estate has been completely impossible to continue.

However, an investment oriented real estate market will pform into a consumer oriented real estate market. It will not only cause a huge market shock but also a huge cost.

But who will pay for these costs and costs? This is the problem facing the government.

Under such circumstances, the government's macroeconomic regulation and control policy is beginning to change its thinking, hoping to destroy a "national bull market" and replace the difficult real estate bubble with the stock market bubble.

However, some people are still shouting, the domestic real estate market has begun to rebound, and the price of the domestic real estate market may soon rise, but this is only in the market expectation, which is in the investment led real estate market, but in fact the domestic real estate market is expected to have changed since the domestic real estate market price has been down for more than 8 months. As long as the real estate market prices are falling, investors will definitely understand that these calls again think that the market has long been a history.

The government hopes to play the role of killing two birds with one stone while the government is destroying the "bull market" of the stock market.

Because, earlier, China's stock market has been in the doldrums for 7 years for a long time, and now it has created a "national bull market". First, it can not only introduce a large amount of capital into the stock market, but also enhance the financing ability of the stock market. This will not only solve the problem of financing difficulties in the domestic financial market, but also help the domestic enterprises get low-cost capital, and also promote the adjustment of the domestic financial market structure, reduce the proportion of banks in the entire financing, thereby reducing the huge risks faced by the domestic banking industry.

Two, we can make the stock market boom and replace the real estate market to create wealth effect.

This will not only benefit residents' consumption growth, but also expand domestic demand, boost confidence in the market, create a new atmosphere of economic growth, and avoid the prophecy of a hard landing on the domestic economy.

From the recent development of the domestic stock market, not only the stock index has risen more than 80% in the past year, but the stock market's earning effect and wealth are gradually showing up, and the domestic residents already know that the government hopes to use the stock market bubble instead of the real estate bubble intention, and rushes into the stock market one after another, thus making the domestic stock market out of the unprecedented hot market, and the daily turnover of the stock market exceeds the historical high of 1 trillion and 400 billion.

In fact, at present, there is nothing wrong with the government's tactics of exchanging time for space. The key is whether we can find the growth point of the domestic real economy and create a new engine of economic growth.

Such as the United States, there are Internet high-tech industries, shale oil and gas, modern agriculture and so on.

The question now is whether the Chinese government is smart or not.