watch out for the devaluation and rise of RMB and plunder wealth
2015-07-24 Read 1582

now, many people are caught in currency confusion: the circulation of RMB in China is increasing, the liquidity is surplus and it is depreciating, but against other countries' currencies, especially the US dollar, the RMB is constantly appreciating. As a result, RMB has been in the strange circle of devaluation and rise for a long time.

of course, it's not surprising that the RMB is declining internally and rising externally. China's huge cheap labor leads to the international transfer of investment and employment opportunities, which leads to the simultaneous appearance of current account surplus and capital account surplus. In theory, current account and capital account are complementary, and it is impossible to have surplus at the same time. However, in China, there is a phenomenon of double surplus: export is greater than import in import and export trade, which leads to current account surplus; export is more than export The inflow of foreign capital in investment is greater than that of domestic capital output, resulting in capital account surplus. This double surplus makes RMB face the pressure of appreciation. The central bank artificially depresses the exchange rate by selling RMB to buy US dollars, which will inevitably lead to the over issuance of RMB base currency and inflation. Foreign countries need to exchange their local currency for RMB to buy Chinese goods, which leads to an increase in the demand for RMB. At the same time, the central bank expands the money supply. The essence of this is that these currencies are still in circulation at home, but only have the same amount of foreign exchange reserves. It is precisely because of the existence of this expectation of RMB appreciation that hot money in the capital account is constantly flowing in, which leads to the problem of excess liquidity in China.

the devaluation and rise of RMB leads to the loss of oneself and the wealth of others. Under the current fixed exchange rate system, every dollar comes in, RMB will be issued according to the exchange rate. That is to say, when the dollar comes in, the central bank will print RMB. At this time, the increase of foreign exchange will devalue the RMB. However, the devaluation of RMB has greatly reduced the wealth of Chinese people. In the past, things that could be purchased with 100 yuan RMB have to be purchased with more RMB, but the growth rate of people's wage income is far lower than that of the devaluation of RMB. On the contrary, as soon as the US dollar goes in and out in China, we can get considerable benefits only by the appreciation of RMB.

at present, some western developed countries adopt competitive currency devaluation, that is, the governments of relevant countries promote the export of goods by devaluing their own currencies. Many times of quantitative easing policy adopted by the United States has led to the continuous depreciation of the US dollar, and a competitive devaluation competition is staged in the world. Recently, in order to boost its economy, Japan adopted the quantitative easing policy of devaluing the yen. On April 4 this year, the newly appointed governor of the Bank of Japan, Toshiko Kuroda, made it clear that Japan will use about two years to achieve the 2% inflation target; replace the unguaranteed overnight lending rate with the amount of base money as the main target of the central bank's money market operation, double the amount of base money within two years, and reach 270 trillion yen by the end of 2014. On April 8, the Bank of Japan announced the implementation of a new open market operation, that is, the purchase of 1.2 trillion yen of long-term treasury bonds. Under the influence of quantitative easing policy, the depreciation of yen against RMB accelerated recently. On the first trading day after the Qingming Festival, the RMB rose 3353 basis points against the yen, and the RMB appreciated nearly 6% against the yen in two trading days. On April 8, the yen depreciated more than 5% against the RMB in a single day. Moreover, public data show that the depreciation rate of yen against RMB has exceeded 20% in the past six months.

countries that are not worried about inflation use exchange rate leverage to boost their economy, while China, which is constrained by inflation, can only do its best to deal with it in other ways, so as to safeguard the wealth of its own people and avoid the loss of others.


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