Exchange rate, also known as exchange rate, is the exchange rate between two currencies. It is produced when foreign exchange is used and must be exchanged with domestic currency. Our country usually takes 100 foreign currency as the standard and converts it into a certain amount of RMB. When 100 unit of foreign currency can be exchanged for more RMB, it means that foreign exchange appreciates (corresponding to RMB depreciation), that is, the foreign exchange rate rises. Exchange rate is an important link between domestic and foreign markets and financial markets. The factors that affect the exchange rate change are: the supply and demand relationship of foreign exchange (that is, the supply and demand relationship); The difference of inflation (or deflation) rate; Economic growth rate; Interest rate level; The intervention and control of the national monetary authorities; Market expectation; Foreign exchange speculation, etc. Under the influence of these factors, the domestic currency (here refers to the paper money circulating in the market instead of metal currency) has changed in both depreciation and appreciation. Exchange rate, like taxation, finance and interest rate, is an important lever to regulate the economy. It plays an important role in national economic development and international trade: import and export trade can be adjusted by raising or lowering; Can affect the direction and quantity of international capital flows; Foreign exchange that can affect non-trade (tourism, remittance); Affect the domestic price level; Affect the real value of foreign exchange reserves.
Foreign exchange reserve is an important part of a country's international reserve, which is used to balance international payments, stabilize exchange rate and repay foreign debts. It is also an important means for a country to improve its international payment ability. China's foreign exchange reserves include foreign currency, foreign government bonds, corporate bonds and stocks. How much is directly related to a country's ability to regulate its economy and its position in international exchanges.
These three concepts are both different and related: foreign exchange is used for trade or non-trade settlement between countries, and foreign exchange has two functions: monetary payment means and international currency; Foreign exchange reserves refer to the quantity and types of foreign exchange held by a country; Exchange rate, also known as exchange rate, is the proportional relationship between foreign exchange and a variable, reflecting the comparison of economic development between countries and the relationship between supply and demand. The growth of China's foreign exchange reserves in recent years means the strengthening of China's economic strength, which is conducive to the stability of the RMB exchange rate.
A concrete analysis of currency appreciation
After a country's currency appreciates (floats), the same amount of this currency can be exchanged for more foreign currencies than before, and more goods can be purchased from other countries. At the same time, the credibility of this currency and the international economic status of this country will also be improved. Despite these advantages, generally speaking, no country will let its currency appreciate unless it has to, because this will bring some serious consequences to a country. For example:
▲ After currency appreciation, the prices of export commodities increase, while the prices of import commodities decrease accordingly, resulting in a decrease in exports and an increase in imports, which has an adverse impact on the balance of payments.
▲ Currency appreciation worsens a country's foreign trade environment, leading to a decline in domestic production, an increase in unemployment and intensification of domestic contradictions.
▲ The appreciation of domestic currency reduces the national foreign exchange reserves or funds returned from foreign exchange in China to domestic currency.
So generally speaking, currency appreciation does more harm than good to a country. Western developed countries generally do not easily choose to appreciate their currencies. Our country is no exception. In the Southeast Asian financial crisis, China's insistence on not devaluing the RMB has advantages and disadvantages, but the advantages outweigh the disadvantages. It enhances the credibility of the RMB, attracts foreign investment, helps to maintain normal trade and stability in Hong Kong, and enhances China's international status.
A concrete analysis of currency depreciation
▲ Impact on balance of payments
First of all, it has an impact on export income: by reducing the value of domestic goods relative to foreign goods, the devaluation of a country's currency makes foreign people increase their demand for domestic products, while domestic residents reduce their demand for foreign products, which is conducive to domestic exports and reduce imports; The purchasing power of foreign currency has increased accordingly, and the costs of goods, services, transportation and accommodation in devalued countries are relatively cheap, which is conducive to attracting foreign tourists and expanding tourism development; Secondly, it also has an impact on international capital flows. If the devaluation trend continues, people will transfer their funds from their own countries to other countries, resulting in capital outflow.
▲ Impact on the domestic economy
After devaluation, a country's trade income tends to increase. The proportion of foreign trade department in the whole economic system will expand, thus improving the degree of domestic opening to the outside world, allowing more products to compete with foreign products, which is conducive to domestic enterprises to "go global"; Depreciation also has an impact on prices: first, the expansion of exports leads to demand-driven price increases; Second, by raising domestic production costs to push up prices, the impact of currency depreciation on prices will gradually expand to all commodities, resulting in an imbalance between supply and demand in the whole society and even inflation.
▲ Impact on the world economy
The currency depreciation of major industrial countries will affect the trade balance of other countries, thus triggering trade wars and exchange rate wars. In international trade and lending activities, the party that accepts the devalued currency will suffer losses, while the party that pays the devalued currency will benefit from it. Exchange rate changes in major industrial countries will also cause turmoil in the international financial field. The exchange rate instability of major currencies will also have a great impact on the national reserve system and the international financial system. The Asian financial crisis that spread all over the world from 65438 to 0997 began with the devaluation of the Thai currency.
China government's attitude towards RMB exchange rate and its significance.
▲ Keeping the RMB exchange rate basically stable is not only conducive to the sustained and stable development of China's economy and finance, but also conducive to the stable development of neighboring countries and regions. Fundamentally speaking, it is also conducive to the stable development of the world economy and finance.
▲ Exchange rate is an important economic variable, but there are many variables that affect and determine economic development, and the status and role of any variable cannot be overemphasized. Some people attribute the economic problems of Japan, the United States or some other countries to exchange rate problems and to the currency values of other countries. This exaggeration of the role of exchange rate in economic development will only cover up the deep-seated contradictions and problems in its own economic development and delay the necessary adjustment and reform. The world financial development and economic history show that no country can rely solely on exchange rate policy to develop, and no country can rely solely on exchange rate policy to get rid of the problems and difficulties it faces in economic development in the future.
▲ A country's exchange rate policy should be determined according to its economic development stage, financial supervision level and enterprise affordability. China's current exchange rate system conforms to China's national conditions and international economic development.
▲ Explore and improve the RMB exchange rate formation mechanism. China will continue to actively cultivate the foreign exchange market, steadily push forward the RMB exchange rate process, further straighten out the relationship between supply and demand, and constantly improve the marketization level of exchange rate formation according to the overall deployment of reform and opening up and the reality of China.
▲ Take various measures to promote the balance of payments. China has always insisted on making full use of "two markets and two resources" at home and abroad to achieve a basic balance of international payments with a slight surplus. While continuing to expand domestic demand and speed up structural adjustment, China will actively take measures to improve the balance of payments and promote the coordinated development inside and outside the economy.