Abstract Since 2015, the RMB, which was originally unpredictable, has increasingly become the most important dimension affecting the Chinese economy. At the end of 2016, the renminbi continued to fall, and the central parity rate against the US dollar hit an eight-year low, and it was reported at 6.9168 on November 25. No mid-year...
Since 2015, the renminbi, which was originally unpredictable, has increasingly become the most important dimension affecting the Chinese economy. At the end of 2016, the renminbi continued to fall, and the central parity rate against the US dollar hit an eight-year low, and it was reported at 6.9168 on November 25. In the middle of the year, many people still regard 6.7 as an important gateway. In October, FT held an annual forum. I hosted the chief economist round table. Most economists saw 6.8 in the trend of the RMB this year. This is actually the mainstream view of the market at that time. However, at the end of November, the renminbi has fallen below 6.9. If it is not the strong shot of the Chinese central bank, it is a matter of time.
Why is the renminbi lower? In addition to the recent impact of the dollar's rise, thinking over a long period of time, the clues will be clearer. This is first and foremost a market correction for past unilateral appreciation. Since the end of 2010, the renminbi has been rising all the way, and it has been depreciating since mid-2014. During the period, the renminbi has appreciated against the dollar from around 6.8, with the highest close to 6.1 and a correction of 6.9. In addition to the changes in the exchange rate curve, it corresponds to the economic picture of Chinese residents buying and buying and various types of enterprises going to sea. For this reason, the current renminbi is lower, first of all, the past has risen a lot, this is the most intuitive understanding.
Second, think longer, not only should we see the depreciation of the renminbi, but also the changes in the exchange rate system. The past appreciation trend of the renminbi brought about a lot of foreign political pressure on China, and also made the renminbi's so-called managed floating exchange rate system progress slowly; correspondingly, with the depreciation trend of the renminbi opening, 2015 811 "The exchange reform and the addition of SDR (Special Drawing Rights) to the RMB this year, the central parity mechanism of the RMB exchange rate has basically taken shape, that is, the "closing exchange rate + a basket of currency exchange rate changes" system has taken shape.
The renminbi issue has gradually become a hot spot. How to understand the extra fierce depreciation trend of the renminbi? The author also participated in many related seminars. FTä¸æ–‡ç½‘ also conducted a lot of special discussions. Scholars, officials, and the industry's understanding framework for the RMB in different fields have some hidden points and some lost.
For example, a popular saying is that the RMB depreciation expectation is embedded in the middle price of the RMB against the US dollar, making the depreciation inevitable. In fact, the RMB middle price formation mechanism is only an institutional design, and its advantages make the RMB exchange rate more transparent. For this reason, the RMB middle price formation mechanism is not the root cause of depreciation, but the appearance of depreciation. It is precisely the introduction of the middle price mechanism that has made the RMB onshore market receive more attention. Compared with the offshore market, the onshore market more represents the domestic residents' views on the RMB and also dominates the current exchange rate trend.
Another example is that whenever exchange rate housing prices fluctuate, there is always a guarantee of the exchange rate or the old stalk of the protection of housing prices, even if the professional institutions are happy, and recently it is the popular housing exchange rate guarantee price assertion. This statement is a direct image, but it is too simple and rude. A few years ago, I talked about the contradiction between exchange rate and asset price in the economic man column, but this correspondence is often similar to the skeleton. The central bank can only balance in it. It is normal to lose sight of it, but it is not one or the other.
The entanglement of the renminbi in 2016 is actually the crux of the Chinese economy. The factor that mirrors the exchange rate depreciation is the loss of foreign exchange reserves. According to official data, in the third quarter of 2016, China's current account surplus was 474.4 billion yuan, and the capital and financial account deficit was 474.4 billion yuan, of which the non-reserve financial account deficit was 138.1 billion yuan, and the reserve assets were 908.5 billion yuan.
Under the renminbi's decline, the central bank's vacillation space has been reduced. There is a "price" and "quantity" trade-off between maintaining exchange rate stability and the number of external reserves. More importantly, the problem of the renminbi is not only reflected in the exchange rate and foreign reserves. The trend of the renminbi continues to constrain the future economic policies. The relatively independent issues such as housing price bubbles, excess capacity and even debt problems are also increasingly closely related to the exchange rate issue. In other words, the problem of the renminbi is actually a sign of the economic crisis. The exchange rate is not terrible, but the bottom line is that it must prevent financial turmoil caused by capital outflows.
In the current analysis of the depreciation of the renminbi, it is very important to ignore the power of the market and at the same time easily fall into the enthusiasm of the central bank. First of all, the exchange rate is on the surface of the price comparison of different currencies, and its dominant force is the information exchange of thousands of investors in the hundreds of millions of massive markets. In which the central bank has a major role, it also needs to adapt to market trends.
Secondly, the nature of exchange rate fluctuations in China in recent years is more related to the change in the return on investment of the Chinese economy. The rise of the RMB in the past is reflected in the rise in the return on assets, and then the return on RMB assets is lower, and the real economy is caught in an asset shortage. After the only strong first-line real estate price in China is also suspected of being overestimated, the exchange rate of the RMB is bound to be weak. Finally, with the growth of Chinese residents and enterprises, the demand for overseas allocated assets itself exists, and this demand itself will continue to strengthen as the RMB exchange rate goes down, which is also the mainstream trend in the medium-term market.
Money is the most test of power. Ancient emperors can choose to put their avatars on top of the currency, but they cannot guarantee that the currency will be supported by the market. The renminbi, in the final analysis, is still dominated by the choice of the people. This article only represents the author's own point of view. The author recently published "The Silver Empire" and "Banknotes". WeChat public number "Xu Wei Economic Man" (econhomo)
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