Although we know the necessity of RMB appreciation to improve our international balance of payments imbalance, the China government did not succumb to internal and external pressures, and quickly and substantially adjusted the exchange rate at the beginning or continued to unilaterally appreciate at the grim moment when the current liquidity crisis penetrated into the real economy. Instead, it quickly began to adjust the RMB exchange rate downward together with the previous export tax rebate strengthening policy (other currencies in the world are also depreciating sharply against the US dollar, such as the pound, the euro and Asian currencies except the Japanese yen). The most fundamental reason is that for many developing countries, the choice and adjustment of exchange rate system is not only to solve the imbalance of international payments to alleviate the trade friction and the impact of currency liquidity in the previous stage.
In fact, our government should pay attention to at least two indicators that are very important for the sustainable development of China's economy: First, economic growth. Because with it, we can solve employment and ensure people's lives. Especially in the current situation of polarization between the rich and the poor, regional differences, labor surplus and limited government resources redistribution ability in China, any factor that causes the rapid decline of economic growth will lead to social disharmony, which has to attract the government's high attention. In the difficult period when the subprime mortgage crisis in the United States evolved into a global financial crisis and then penetrated into the real economy, the government's foothold will take into account the goal of "maintaining growth".
the second is to maintain price stability. No matter whether the price rise is driven by cost, or caused by the flood of liquidity, or driven by strong demand (in fact, there is a strong correlation between the two sometimes), as long as the purchasing power of the public is seriously damaged, especially in the unbalanced environment of China's economic development, it is possible to seriously destroy the harmonious ecological environment of society because of the problem of high inflation. In the second half of last year, due to the rising prices of industrial production factors in Gao Teng and the import prices of agricultural products, we encountered such challenges. Today, however, we should pay attention to another problem of price stability-that is, like South Korea, the phenomenon of currency depreciation caused by the flood of local currency caused by the large withdrawal of foreign capital. Therefore, the central bank actively adjusted the exchange rate downwards to increase the cost of exchanging hot money for foreign exchange, thus ensuring the price stability in the China market.
Generally speaking, it is difficult to balance the two major goals of "economic growth" and "price stability". In particular, China is highly dependent on foreign economy at present, and the adjustment of exchange rate level is not artistic, which will highlight the conflict between these two major goals. For example, the rapid appreciation of RMB, although it can crowd out inferior enterprises that compete with vicious prices, can also alleviate the massive inflow of capital, but it may affect the level of foreign direct investment in China and the export industry, a pillar of China's economic growth, thus affecting growth and employment. On the contrary, if we insist on the stability of exchange rate blindly, then the cost of trade friction will increase and the pressure of excess liquidity will increase. Although the current deflation problem is a concern of the whole world, in the medium and long term, the excessive liquidity invested in rescuing the market together with the huge balance of payments surplus (because in today's depressed economic era when people pay more attention to prices, the comparative advantage of China's labor force will be more fully reflected under the guarantee of a competitive exchange rate level, and the engine of trade-driven growth will be unstoppable) will also pose a threat to our price stability. Therefore, the government is trying to balance the above two goals through active exchange rate "adjustment" under the environment that capital account control is used and the intervention effect of RMB foreign exchange market is obvious. In this sense, the adjustment of exchange rate system and exchange rate level is not necessarily directly focused on the balance of international payments in the short term, but more importantly, it is necessary to reduce the cost of the above two policy goals to a minimum through exchange rate adjustment.
today, we have to admit that due to the slowdown of the world economic growth, the problems of enterprise closure and labor unemployment in various countries will become more and more serious, so the "self-protection" in trade and exchange rate may evolve into a situation of "excessive price competition" among countries, which will have a negative impact on the development of economic globalization and financial globalization that has been continuously promoted so far. In particular, the control of the pace of exchange rate reform of China government has brought unexpected "containment effect".
Based on the above facts, we believe that in order to completely get rid of the negative impact of the game of "price competition" among countries on China's economy, the China government should first continue to increase efforts to improve people's livelihood to stimulate consumption, and promote the adjustment of industrial structure and optimize income redistribution policies, so as to improve China's domestic demand level and the whole society to resist the possible negative impact caused by exchange rate policy changes. For example, leading industries and emerging industries should be given necessary and appropriate "assistance" (strong tax reduction and financial subsidy policies, etc.) while promoting their transfer to high value-added industrial chains.
At the same time, proper arrangements should be made for the unemployed released by the industrial structure transformation. And create more and better employment opportunities as soon as possible to absorb the rising pressure of the job market (for example, employment opportunities brought about by rural urbanization and industrialization, etc.). Moreover, only in this way can we really improve the purchasing power of China consumers, expand the level of sustainable domestic demand and maintain vital social harmony. Otherwise, the current rapid and sharp contraction of external demand will make the government pay a greater management cost in the future.
On the other hand, this crisis has made us deeply realize that the operation mode and structural optimization of foreign exchange assets are becoming more and more important. Although the overseas operation of sovereign funds and the optimization of the asset structure of foreign exchange reserves are essential, the operating cost is increasing due to the strengthening of external "vigilance" and the overreaction of the current international financial market. Therefore, in the process of this round of joint rescue, the government should strengthen the import of scarce resources and technical products, establish necessary strategic reserves and promote the upgrading of its own industries on the basis of constantly strengthening its "right to speak" in the international political arena, and at the same time provide institutional convenience and information utilization convenience for the overseas assets operation of private enterprises.
furthermore, the government should invest the necessary human capital to further attract a group of overseas talents who have made achievements and improve the quality of China's overall overseas market operation. Of course, the business behavior of enterprises will also require enterprises to "learn" spontaneously. However, the profit-seeking behavior will often make enterprises fall into a short-sighted situation, resulting in insufficient investment in human capital and declining quality.
finally, from the macro level, the government should be very sober and not allow the RMB price to be adjusted excessively. Otherwise, it will not only cause more international frictions from all sides and affect our normal exports, but also relax our efforts to control exchange rate risks. Therefore, in the short term, China government can strengthen effective capital management (although the cost is increasing) to prevent the fluctuation pressure of large-scale capital movement on China's exchange rate level. Otherwise, the pace of RMB exchange rate reform may be out of control.
In short, using the RMB exchange rate adjustment tool can really alleviate the employment pressure in the short term and promote the recovery of China's real economy as quickly as possible. However, in the medium and long term, because our competitors will also "follow" us strategically, and the awareness and level of China enterprises' exchange rate risk control ability have not been substantially improved, our products will eventually become uncompetitive in the international market, thus affecting the business performance of China enterprises and the sustainable development of China's economy. Recently, many enterprises and institutions have incurred exchange losses that cannot be ignored in this round of "dollar dominance", which is the most urgent crisis warning signal to deal with! In this sense, the central bank's active exchange rate adjustment is mainly to gain valuable time for the macro-economic policies of "stimulating domestic demand" and "structural adjustment" to play a role gradually (otherwise, once the economy has a "hard landing", it will destroy China's social harmony), rather than simply releasing to the market the policy signal that the China government will continue to adopt active exchange rate depreciation to promote exports and ensure employment in the future.