Abstract: With the sustained high-speed development of China's economy and the sharp increase of foreign exchange reserves, under the pressure of the international community led by the United States, the appreciation of RMB has become the focus of attention of all countries in the world. Due to the imperfect development of China's foreign exchange market, the appreciation of RMB has a certain impact and influence on the foreign exchange market. This paper puts forward some countermeasures to prevent the foreign exchange risk crisis on how to activate the foreign exchange market, promote the development of the foreign exchange market in the direction of marketization and ensure the stability of China's foreign exchange market.
Keywords: RMB appreciation, foreign exchange market impact countermeasures
Although RMB is not a "freely convertible" currency, there is a close relationship between RMB and foreign currency due to various economic, political and cultural exchanges between China and other countries in the world. RMB exchange rate is the exchange rate of RMB against foreign currency, representing the external value of RMB in China. Since 2 1 RMB appreciated by 2% on July 2005, the RMB has continuously appreciated against the US dollar. As of April 2008 10, the exchange rate of RMB against the US dollar broke 7 for the first time, and the RMB exchange rate became the focus of public opinion.
I. Reasons for RMB appreciation
The reason of RMB appreciation comes from the internal motivation and external pressure of China's economic system. The internal influencing factors are balance of payments, foreign exchange reserves, price level and inflation, economic growth and interest rate level. The main reasons for RMB appreciation are: (1) Due to China's economic development, technological progress and technological innovation, the demand for imported goods has decreased, and the competitiveness of foreign exports has increased, thus promoting the appreciation of the local currency; (2) The rapid growth of foreign exchange reserves and the large surplus of international payments have caused the appreciation of RMB to some extent. Since 1994, China's current account has maintained a surplus, increasing from165.6 billion US dollars at the end of 2000 to1528.2 billion US dollars at the end of 2007, with an average annual increase of more than 37%. By the end of February 2006, China has become the largest foreign exchange reserve country. (3) The increase in interest rates and the inflow of large amounts of foreign capital boosted the RMB exchange rate. The increase of money in the market in a short period of time caused excess liquidity and inflationary pressure, and the government took macro-control measures such as raising interest rates to curb inflation and raise interest rates, thus causing a large amount of foreign capital inflows; (4) There is great pressure from the international community for RMB appreciation, mainly from the United States. The reason why the United States is pressuring the appreciation of the RMB is because it hopes to prevent China's goods from entering the United States on a large scale through the appreciation of the RMB, so as to slow down the growth of the US trade deficit, reduce its trade deficit and gain a larger market share in the global trade competition.
Because foreign exchange can be used to pay off the international bond debt relationship, like gold, it is an important part of a country's international reserve assets. Adequate foreign exchange reserves are an important symbol of China's growing economic strength and improving the level of opening up to the outside world, and also a powerful guarantee for us to promote domestic economic development and participate in foreign economic activities.
After China's entry into WTO, with the deepening of global economic integration, the economic ties between countries have become increasingly close. As a place for foreign exchange transactions, the foreign exchange market is a major part of the financial market. As a link of international economic ties, the foreign exchange market reflects the trend of international economy and exchange rate changes in various countries, provides convenient conditions for promoting the development of international trade, international investment and various international economic exchanges, and plays an important role in the economic development of various countries and the world. Its main functions are: (1) realizing the transfer of international purchasing power and clearing various economic transactions; (2) connecting the credit markets and capital markets of various countries, making international financing possible; (3) Providing a market for arbitrage transactions, which is a place for hedging, facilitating foreign exchange risk management, regulating foreign exchange supply and demand, and preventing exchange rate risks; (4) It provides a place for foreign exchange speculators seeking risk profits.
Second, the impact of RMB appreciation on the foreign exchange market:
Internationally, the appreciation of RMB means the promotion of RMB status and China's economy in the world economy.
The promotion of China's status; China's foreign exchange liability industry also benefits from this, and the appreciation of RMB will bring exchange gains to these industries; On the other hand, it also helps to ease the relationship between major trading partners and reduce the economic and trade contradictions in the foreign exchange market.
At home, people's RMB is valuable, which is mainly reflected in the increase of purchasing power abroad: the appreciation of RMB correspondingly reduces the cost of outbound tourism, and what tourists can buy is more affordable. At the same time, the appreciation of RMB can reduce the burden of imported energy and raw materials, thus reducing the cost of domestic enterprises and enhancing their competitiveness.
However, once the RMB appreciates, it will increase the risk of China's economic operation and pose a threat to the stability of China's foreign exchange market. As far as investors are concerned, what should foreign currency holders do? The appreciation of the renminbi will inevitably make them think about whether they should settle foreign exchange as soon as possible. Some investors have converted their foreign exchange into RMB for fear of falling into shrinking foreign currency assets, and some investors have arbitrage opportunities through fluctuations in the foreign exchange market to obtain investment income. From a macro perspective, the foreign exchange risks brought by RMB appreciation are as follows:
The appreciation of RMB (1) threatens to shrink the huge foreign exchange reserves, leading to the inevitable loss of foreign exchange reserves. As China's foreign exchange reserves are composed of various foreign exchange assets, including US dollar assets, euro assets, Japanese yen assets and British pound assets, and US dollar assets account for a relatively large proportion of China's foreign exchange reserves, and China is facing a serious risk of depreciation of foreign exchange reserves. If RMB appreciates by 10%, then RMB will be converted into US dollars, and China's foreign exchange reserves will shrink by 10%.
(2) RMB appreciation is not conducive to the timely reform of exchange rate mechanism in China. The constant pressure of the United States on the appreciation of RMB has triggered the expectation of RMB appreciation in the international community in order to improve the effect of dollar depreciation. In this case, it is very passive and difficult for China to choose the right time to reform the exchange rate system.
(3) The appreciation of RMB triggered the influx of international speculative capital, which made it more difficult for China to guard against foreign exchange risks. Affected by the expectation of RMB appreciation, a considerable amount of international speculative capital poured into China for arbitrage or speculation. Due to the strong liquidity and destructiveness of speculative capital, it is easy to cause turmoil in China's foreign exchange market and increase the difficulty of effectively preventing foreign exchange risks.
(4) RMB appreciation is not conducive to China's effective monetary policy. The pressure of RMB appreciation hinders the initiative of monetary policy and weakens the effect of moderately tightening monetary policy.
(5) The appreciation of RMB may aggravate the deterioration of China's terms of trade. The appreciation of RMB is not conducive to exports, and the competitive advantage of China's export commodities in price is affected; The increase of imported products and the outflow of capital; It also adversely affects the competitiveness of domestic enterprises and increases domestic employment pressure; Not conducive to the introduction of foreign capital, the depreciation of the dollar will aggravate the downward trend of China's export products and further worsen China's terms of trade.
Although the appreciation of RMB will lead to the depreciation of China's foreign exchange reserves, we can minimize the loss of foreign exchange reserves by controlling the scale of reserves, optimizing the reserve currency, and adjusting the reserve form and foreign exchange reserve currency.
Three. Countermeasures against foreign exchange risks;
1. The most important thing is to form a flexible exchange rate formation mechanism and improve the marketization of the RMB exchange rate formation mechanism. Perfecting the RMB exchange rate formation mechanism, further exerting the basic role of market supply and demand in RMB exchange rate formation, and enhancing the flexibility of RMB exchange rate will help optimize the allocation of resources and curb price increases.
(1) Reform the foreign exchange settlement system and gradually transition to the willing foreign exchange settlement system. A large amount of foreign exchange in China has accumulated in the hands of the state, which has greatly exceeded the level of normal needs. This not only brings huge management pressure, but also makes the risk of exchange rate changes highly concentrated in the central government, which is not in line with the principle of modern financial risk dispersion. The state should allow enterprises or individuals to own and control some of the foreign exchange they have obtained, let more foreign exchange stay in the private sector, and gradually change the forced settlement of foreign exchange into willing settlement of foreign exchange.
Of course, while the reform of foreign exchange management system is changing from centralized management to decentralized management, it is also necessary to ensure that the foreign exchange reserves necessary for China's social and economic development can be at a reasonable level. This is the need to ensure national strategic security.
(2) Formulate a reasonable floating range of exchange rate to increase the flexibility of RMB exchange rate. China's ability to resist exchange rate fluctuations is quite weak, modern enterprises have just started, foreign exchange risk awareness is not strong, and the central bank's supervision ability is insufficient. After China joined the WTO, the balance of payments fluctuated greatly. From the perspective of China's balance of payments, it is necessary to formulate a reasonable floating range of exchange rate and increase the flexibility of RMB exchange rate. The implementation of the RMB exchange rate target zone will help the RMB exchange rate return to an equilibrium level, fluctuate between the upper and lower limits of the target zone, and inhibit the accelerated appreciation of the RMB in China.
(3) Improve and perfect the intervention mechanism of the central bank. Since the appreciation of RMB in July, 2005, RMB exchange rate has participated in a basket of currencies, which helps to maintain China's international competitiveness. A basket of currencies played down the concern about the exchange rate of the US dollar, and selected the currencies of countries with close trade relations with China as weights. The weights of national currencies can be adjusted according to the changes of foreign economic situation, reducing the number of central bank interventions in the foreign exchange market, which is more in line with market-oriented reform.
2. Introduce options and futures trading, and cultivate and improve the foreign exchange market.
The fundamental improvement of China's foreign exchange market depends on the following three changes: (1) the development of the national economy. The higher growth rate of China's GDP and foreign trade can provide a good foundation for the development of foreign exchange market; (2) The relaxation of foreign exchange control will accelerate the process of RMB convertibility. With the rapid economic growth, the relaxation of foreign exchange control in China has obviously accelerated, and speeding up the process of RMB free convertibility will greatly promote the construction of foreign exchange market; (3) Cultivate the foreign exchange market. Cultivate and bring up a certain number of market makers, make use of market traders to activate the foreign exchange market, and adopt a flexible floating exchange rate system to make the central parity of RMB come into being in the market. By increasing foreign exchange trading tools, introducing options and futures trading, we will actively develop foreign exchange derivatives trading, accelerate the liquidity of the inter-bank foreign exchange market, and avoid risks in the forward market and options market. At the same time, expand the trading entities in the foreign exchange market, liberalize major foreign trade enterprises, increase the scale of foreign exchange transactions, and allow more enterprises and financial institutions to directly participate in transactions.
It is worth noting that the foreign exchange trading market does not have a fixed trading place, but relies on a global network composed of banks, companies and individual investors. Therefore, China should invest manpower and financial resources to establish an electronic trading system suitable for China's national conditions and gradually realize the complete electronization of transactions.
The government should take strong measures to stabilize the foreign exchange market and control the excessive growth of foreign exchange reserves.
(1) Improve the quality and scale of China's foreign exchange reserves and adjust the trade surplus. On the one hand, by reducing export tax rebate, making enterprises bear the social cost of environmental pollution and raising the minimum wage level, the export volume of low-profit commodity export enterprises can be adjusted and reduced. On the other hand, in addition to taking measures to encourage the import of high-tech products, we should also increase the import of products that are in short supply at home, which can not only meet people's consumption demand and solve the shortage of certain commodities, but also alleviate the increase of trade surplus, thus slowing down the excessive growth of foreign exchange reserves.
(2) Control the growth of savings and increase residents' consumption. The high foreign exchange reserve is caused by external economic imbalance, and the root of external economic imbalance is domestic economic imbalance. China should try its best to slow down the rate and extent of appreciation, actively improve the structure of foreign trade, develop pillar science and technology industries and increase the added value of products. Improve social welfare policies, stimulate domestic demand, avoid repeated investment and reduce economic overheating. Therefore, increase financial expenditure, improve the social security system and guide residents' consumption.
(3) Pay attention to the quality of foreign investment. It is forbidden to introduce repetitive construction projects with low quality, high pollution and high energy consumption, encourage the introduction of foreign capital with high technology content and advanced management experience, and truly use foreign resources to improve the quality and added value of goods, promote the upgrading of China's industrial structure and enhance the competitiveness of China's products.
4. Keep the RMB exchange rate relatively stable and China's monetary policy relatively independent. Even in the face of enormous international pressure, we should control the exchange rate according to the needs of China's economic development. At present, China should continue to strengthen and improve macro-control, use various means to promote the balance of international payments, further promote the reform of exchange rate formation mechanism, and moderately relax the fluctuation range of RMB exchange rate to reduce the pressure of appreciation, so as to maintain the relative stability of RMB exchange rate and the relative independence of China's monetary policy. Maintaining the basic stability of RMB is determined by the development level and basic characteristics of our economy.
5. Enterprises should strengthen the awareness of economic accounting and foreign exchange risk to adapt to the market competition after China's entry into WTO. As an export enterprise, it should have a systematic foreign exchange risk management strategy, strive to increase the added value of export products based on the principle of maximizing income, gradually change the original practice of entering the international market with low labor cost and low price, speed up the adjustment of export structure, optimize the industrial structure, and improve the ability of foreign trade enterprises to control foreign exchange risks and explore the competitiveness of the international market.
6. Strengthen the construction of the legal system and maintain the normal order of the foreign exchange trading market. It is the basis for the development and stable operation of the foreign exchange market to establish and improve the system of laws and regulations and standardize the procedures and codes of conduct of foreign exchange market transactions in the form of laws. A relatively perfect system of laws and regulations is an indispensable prerequisite for the healthy development of the foreign exchange market, maintaining the normal order of the foreign exchange market and ensuring that the legitimate interests of all trading parties in the market are not infringed.
Four. Conclusion:
The appreciation of RMB is of great significance to further enhance China's influence in the international community and seek political, economic and strategic interests. However, the reform of RMB exchange rate must adhere to the principles of initiative, controllability and gradualism, and consider the impact of RMB exchange rate changes on China's economy and society, as well as the impact on surrounding areas and even the world, and should not be accelerated due to external pressure.