How To Solve The Problem Of Overvaluation Of RMB?

We must bear in mind two things: first, under the open conditions, the appreciation of the local currency and the tight monetary conditions in the country, the depreciation of the local currency and the ease of the domestic monetary conditions are the two faces of a coin. It is one thing; second, under the open conditions, the monetary conditions of the weak currency countries (non hard cargo countries) are loose, not only compare with the historical monetary data of their own countries, but also compare with the real monetary conditions of the strong currency countries (hard currency countries).

What do we mean? For the first, we might as well look at the current developed countries. When the Federal Reserve announces a large-scale quantitative easing currency, how does the US dollar exchange rate manifest? There is no doubt that the market immediately expects the US dollar to depreciate.

Similarly, when the Federal Reserve flips the market to raise interest rates, the dollar appreciation is expected to become very strong.

This fact has fully demonstrated that the easing of domestic monetary conditions and the appreciation (depreciation) of the local currency exchange rate are actually the same thing, the two sides of a coin, and the inseparable whole.

3, for second, we still use facts to speak.

After the massive quantitative easing currency of the Federal Reserve, almost all developed countries, which believe that the strength of their currencies is weaker than the US dollar, all follow the US dollar's massive quantitative easing.

Why? Because the US dollar is the most powerful currency in the world. If it inflation and other countries do not follow, the world will surely have the wealth redistribution effect of "strong currency countries hijacking weak currency countries".

In the past 7 years, this is exactly the case. The depreciation of the US dollar has not been expressed from the exchange rate. The reason is very simple. It is because all the currencies in the US dollar index (basket currency) countries are all engaged in large-scale quantitative easing currencies.

It can be seen that among the great powers, only China's domestic monetary policy has been repaid, especially after the implementation of the tight monetary policy after 2010, making the nominal and real exchange rate of RMB both appreciating substantially, so China has become the weakling of the global wealth redistribution process.

The serious question is whether our monetary authorities see this fact. Do they recognize the fact that whether or not we still insist on loosening exchange rate control can get an independent monetary policy? I think at least they are hesitant now.

In fact, China's monetary conditions are tight, and not tight or tight, in comparison with the past and the hard currency countries.

It will inevitably lead to a serious consequence: the living environment of China's real economy is deteriorating constantly, while the real economic environment of hard currency countries has been continuously optimized.

There is also a more serious question: can the emerging industries grow rapidly and grow fast under tight monetary conditions? I don't think so.

Why? Because the development of new industries must rely on active and progressive equity financing, relying on the stock market to provide "countless equity capital", but under tight conditions, will such a market situation appear in the stock market?

There is still a big problem.

I think the renminbi has been in existence for a long time.

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But according to the current exchange rate formation mechanism, a large trade surplus will surely block the devaluation of RMB.

The figures released just by the General Administration of Customs show that China's trade surplus reached 2 trillion and 990 billion yuan and expanded 75.3% in the first 10 months, compared with that in October.

393 billion 220 million yuan, expand 40.2%.

On the one hand, China's weak economy needs loose currency and RMB depreciation; on the other hand, the trade surplus is increasing, forcing the renminbi to appreciate and tightening the currency.

Is this a nuisance?

This situation has been repeatedly mentioned in the past 5 years, and there are numerous warning.

I think China needs to reconsider the RMB exchange rate formation mechanism or push it forward.

The calculation method of import and export data eliminates the surplus of processing trade.

But so far, there seems to be little progress.

But in my view, this is the death hole of China's economy.

The stock market will not work. Can the debt market effectively support innovation? If so, bad loans and bad debts will explode until the financial crisis happens.

The problem is that we have been doing this for a long time, so that China's economy is now struggling.

So, in a sense, the downward pressure on China's economy today is likely to be the result of "wealth being allocated".

The foreign trade figures for October are coming out.

The situation is not surprising. The key is that I always feel bad when I see import data.

Because the decline in the number of two digits has been going on for a long time.

If the decline in exports is the weakness of external demand, will the larger decline in import data indicate greater difficulties in domestic demand? This is actually a bigger worry for me.

Why is domestic demand so difficult? Is this related to the long term tightening of monetary conditions in China? Of course, at least I look at it.

Because the direct consequence of monetary tightening is to curb domestic demand.