On the evening of June 19, 2010, the People's Bank of China announced: to further promote the reform of the RMB exchange rate formation mechanism and enhance the flexibility of the RMB exchange rate, that is, to dynamically adjust the RMB exchange rate floating range in accordance with the published foreign exchange market exchange rate floating range. Management and regulation. The central bank emphasized that the exchange rate reform focuses on adhering to market supply and demand as the basis and making adjustments with reference to a basket of currencies. Restarting exchange rate reform is a necessary step for China to deepen its economic reform. At present, the global economy is gradually recovering, the foundation for China's economic recovery has been further consolidated, the economic operation has stabilized, and the time for exchange reform has gradually matured. However, exchange reform will inevitably lead to stronger expectations of RMB appreciation. What are the domestic and international economic consequences of the expected increase in RMB appreciation? Currency exchange rate is a reflection of a country's sovereignty. Why do the United States and other Western developed countries interfere so much? What is the purpose?

Why do the United States and other countries always focus on the RMB exchange rate?

As early as 2002, Western countries fired the first shot at the RMB exchange rate issue. At that time, Japan's Finance Minister and the "Yomiuri Shimbun" led the charge, strongly condemning China's deliberate manipulation of exchange rates and dumping goods at low prices to the world. It was the main culprit of global deflation, and demanded that the "Group of Seven Western Countries" pass a resolution to force the RMB exchange rate to appreciate. . Following Japan, senior U.S. officials, financial giants, and mainstream media immediately followed suit, and the European Union also waved its flag and shouted. Suddenly, the RMB suddenly became the target of public criticism. However, the slow appreciation of the RMB over several years has not been able to satisfy the appetite of Western countries. After the outbreak of the international financial crisis, Western countries temporarily restrained their calls for continued appreciation of the RMB because they needed China's policy cooperation. However, as soon as the global economy showed signs of improvement, Western countries immediately resumed their past bossy attitude and once again resorted to forcing the RMB to The banner of appreciation.

Since the second half of 2009, China's monetary authorities have been under strong pressure from international public opinion on RMB appreciation. The U.S. Treasury Department submits a report on international economic and exchange rate policies to Congress every six months. Countries identified in the report as currency manipulators may ultimately be subject to U.S. trade sanctions. The U.S. Treasury Department issued a report on October 15, 2009, stating that the United States still believes that the value of the RMB has been significantly undervalued and will continue to lobby the Chinese government to liberalize the RMB exchange rate. U.S. officials also called for China's foreign exchange rate mechanism to be more flexible, saying such efforts would give China more room to maintain price stability. The RMB exchange rate issue escalated again in April 2010. US Senator Charles Schumer of New York State announced an upgraded version of the "Schumer Bill" on April 16 and initiated the legislative process to once again put pressure on China on the RMB exchange rate issue. The United States has also joined forces with India and other countries to put pressure on the Chinese government to force the RMB to appreciate.

It is no accident that developed countries have raised the issue of RMB exchange rate again. This is closely related to the current world economic situation. After developed economies such as the United States, Europe, and Japan fell into recession one after another in 2008, their economies rebounded significantly from the second quarter of 2009, stimulated by unprecedented expansionary fiscal and monetary policies. However, this rebound is mainly caused by government stimulus policies and corporate restocking. This wave of economic rebound lacks sustainability until the unemployment rate in major economies does not drop significantly and consumption improves significantly.

Under the premise that government expansionary policies are unsustainable, governments around the world have to do everything possible to find new growth drivers to fill the gap after the effectiveness of expansionary policies disappears. It is a natural choice to improve the international competitiveness of the country's export commodities by devaluing the local currency or forcing the currency of competitors to appreciate, and to drive economic growth by expanding the trade surplus or narrowing the trade deficit. If countries such as the United States devalue their currencies, they will increase exports and lead to an increase in employment and consumption. Of course, for this kind of beggar-thy-neighbor policy to achieve the desired effect, other countries must not adopt the same approach of devaluing their currencies. Otherwise, competitive devaluation will not only make the policy ineffective, but also lead to serious inflation problems. The external pressure for RMB appreciation actually reflects the rising trade protectionism in developed countries. Instead of suppressing China's exports of specific commodities (such as the tire protection case), it is naturally better to require the appreciation of the RMB once and for all. Therefore, the various anti-dumping and countervailing waves against China's exports in the recent past are actually coordinated with the pressure for RMB appreciation.

It can be seen that the Western world uses the RMB exchange rate as a target of attack, undoubtedly out of considerations of its own national interests. In the context of the current financial crisis, the Western world is once again forcing the RMB to appreciate. On the one hand, it is to divert international attention and shirk its responsibility in the formation, development and response to the global financial crisis; on the other hand, it is trying to force China is paying for the financial crisis. As for the "undervalued RMB exchange rate" and its connection with "global economic imbalance", it is just an excuse for Western countries to pass on the responsibility for their own interests. It should be pointed out that since the Chinese government launched the RMB exchange rate reform in July 2005, as of the second quarter of 2010, the nominal exchange rate of RMB against the US dollar has appreciated by more than 20%. As of June 22, the central parity rate of the RMB exchange rate has fallen below 6.80. Hit a new low.

The domestic impact of RMB appreciation

The external pressure for RMB appreciation has returned. From a psychological level, it is very likely to bring about a rebound in expectations for RMB appreciation.

Once domestic and foreign companies, residents, and investors once again form expectations for unilateral appreciation of the RMB, China's international balance of payments may once again repeat the rapid growth in 2007 and the first half of 2008, and short-term international capital (hot money) will pour in.

The enlargement of the double surplus in the balance of payments has led to a surge in foreign exchange reserves, and the amount of base currency issued by the monetary authorities in the form of foreign exchange reserves has increased. Although the central bank can offset the increase in base money by issuing central bank bills, raising the statutory deposit reserve ratio, etc., sterilization may increase the cost of the central bank, cause the monetary policy to lose its independence, or push up market interest rates, thereby attracting more Large capital inflows are arbitrage, so sterilization is unsustainable. If sterilization is unsustainable or incomplete, then the surge in foreign exchange reserves will inevitably exacerbate excess domestic liquidity. Excess liquidity either flows into the asset market, pushing up asset prices; or it flows into the commodity market, exacerbating inflationary pressure. In short, once expectations for unilateral appreciation of the RMB are formed and strengthened, China may once again face the unfavorable situation of excess liquidity, rising asset prices, and rising inflationary pressures.

The appreciation of the RMB will also bring about two other direct impacts. First, it will lead to the improvement of China's trade conditions, and one unit of exported goods can buy more imported goods. However, high export commodity prices will inevitably lead to a reduction in China's export volume and a shrinking foreign trade balance. The consequence of reduced exports is that a large number of export-oriented small and medium-sized enterprises find it difficult to survive and unemployment increases. Second, the depreciation of the U.S. dollar caused by the appreciation of the RMB has led to the depreciation of foreign exchange reserves denominated in U.S. dollars. At the same time, the income from foreign exchange reserves invested in U.S. long- and short-term Treasury bonds is also facing the threat of shrinking. The foreign exchange reserves accumulated by the Chinese people relying on cheap labor costs and frugally will shrink significantly due to the depreciation of the US dollar.

The impact of RMB appreciation on the international foreign exchange market

However, as expectations for RMB appreciation strengthen, the trend of the US dollar is variable and has far-reaching consequences. The gradual appreciation of the RMB will further increase the scale of China's foreign exchange reserves, which will objectively increase China's need to purchase other foreign exchange assets such as the euro to cope with the diversification and structural rationalization of foreign exchange reserves, thereby putting pressure on U.S. dollar assets. If the U.S. dollar continues to weaken, the international status of the U.S. dollar will be seriously impacted. This impact will greatly shake Americans' consumption habits and change the American culture that has been formed after Americans won World War II and the Cold War. Once the U.S. dollar strengthens, it may lead to significant adjustments in global financial markets, and an important impact mechanism is the unwinding of carry trades. In order to avoid the pressure of US dollar depreciation, the central banks of many economies have significantly changed the currency structure of new foreign exchange reserves. This has caused almost every non-US dollar reserve currency to be over-bought in the short term. Although the financial market has The dollar component of the portfolio is declining.

In the medium to long term, the United States needs to adjust its fiscal deficit, restore economic growth, and solve problems in the economic system, otherwise it may face a long-term pattern of weakness. If the U.S. economic growth in 2010 is faster than expected, then the U.S. dollar may continue to strengthen along with the U.S. economy by the end of 2010. But another view is that the weakening trend of the U.S. dollar needs to be continued for a period of time to promote the recovery of U.S. exports and even the entire economy. This will bring about the problem of large-scale international capital flows. If the RMB does not appreciate and the United States does not raise interest rates by the end of 2010, then the pressure on net capital inflows from developing countries will increase by 2010, and carry trades will continue to be active. From a global perspective, each country has its own policy considerations regarding exchange rates. Although the RMB has not appreciated, from the perspective of effective exchange rate, compared with the currencies of some developing countries, it has not depreciated significantly. The non-appreciation of the RMB will prevent the currencies of other developing countries, especially those exporting commodities and resources, from appreciating too quickly, thereby promoting the flow of global liquidity to developing countries.

The appreciation of the RMB will have a certain impact on the currencies of countries related to China's trade, especially the currencies of related Asian countries. The appreciation of the RMB may lead to the appreciation of other Asian currencies, or other Asian countries may relax the extent of their currency appreciation. For example, economies such as South Korea, Malaysia and Taiwan, which are China's export competitors, will be less opposed to the appreciation of their own currencies. It is possible to significantly push up the exchange rates of the Malaysian ringgit, Korean won and Taiwan dollar against the US dollar. my country has been Japan's largest export target country since 2009. In 2009, Japan's exports to the United States decreased by 22.7% year-on-year, a decline for three consecutive years; exports to the EU decreased by 27.5%, a decline for two consecutive years; exports to Asia decreased 8.3%, a decline lower than that of the United States and the European Union. After the RMB appreciates, the Japanese yen may also appreciate, which will not affect its exports. In South Korea's trade surplus in 2009, China accounted for the largest proportion, followed by Hong Kong, the European Union, the United States, Central and South America, ASEAN, and Africa. It had a deficit with the Middle East and Japan. The appreciation of the renminbi may cause South Korea to appreciate the won in response to the adverse consequences of its expansionary policy, and foreign trade will not be significantly affected. RMB appreciation may convey to the market the message of China's tightening monetary policy, which may have a dampening effect on broader risk appetite. Not only would this put commodity-linked currencies under pressure, but it would also increase safe-haven demand for the yen, causing the yen to rise against the dollar.

The impact of RMB appreciation on the international commodity market

RMB appreciation means the increase in China’s purchasing power, which will definitely increase the demand for commodities.

In the international crude oil market, the Chinese factor is playing an increasingly important role and has always been an important factor in the speculation of international speculative funds. The appreciation of the RMB is tantamount to the depreciation of the US dollar, and crude oil is priced in US dollars. The appreciation of the RMB will directly reduce China’s crude oil import costs and enhance foreign crude oil suppliers’ expectations for China’s increased purchasing power, which will in turn be beneficial to the international crude oil market. However, it should also be noted that there are also negative factors in the international commodity market. First of all, the appreciation of the RMB will inhibit China's commodity exports and the entry of foreign capital to a certain extent in the short term, which will in turn have a certain degree of negative impact on the rapidly developing Chinese economy, thereby reducing the growth rate of China's crude oil import demand, which will have a negative impact on China's rapidly developing economy. The international crude oil market is undoubtedly a big negative; secondly, China is a major importer of fuel oil, and fuel oil is the only market-oriented refined oil product in China. The appreciation of the RMB will directly lead to a decrease in the spot price of fuel oil denominated in RMB. In short, the appreciation of the RMB will lead to both long and short positions in the international and domestic oil markets in the short term.

On the surface, the gradual appreciation of the RMB is the slow depreciation of the US dollar. The price of gold in U.S. dollars will increase. But in fact, the price of either oil or gold is not determined by market supply and demand, but is controlled by international crude oil futures and gold futures speculators. If international speculators speculate on crude oil and gold at the same time, they will use crude oil and gold as a seesaw - either artificially suppressing the price of gold and raising the price of oil, or artificially suppressing the price of oil and raising the price of gold. The current gold futures price has seriously deviated from the value of gold and a basket of international currencies; and some people have firmly predicted that the international gold futures price will reach a height of US$2,000. All this is the same as what happened when oil futures prices rose sharply. Oil futures prices were also artificially raised in this way. At that time, some people boldly predicted that the price of oil futures would reach US$200 per barrel. However, soon after, the price of oil futures fell all the way until it stopped falling around US$55. If the price of gold futures continues to rise, along with the slow appreciation of the renminbi, the "appreciated" renminbi in the hands of the Chinese can be exchanged for US dollars, and then they can buy gold, allowing the Chinese to take over the plate of gold futures, and this may be Gold futures prices are about to collapse.