Xiao Lei: What Can We Do To Stabilize The RMB Exchange Rate?

Before China's financial market is open and competitive, manufacturing is still the real anchor of the renminbi.

If China's manufacturing industry continues to slump, the pressure on the renminbi will be greater, because the market is concerned about what is behind the renminbi, not the renminbi itself.

The RMB exchange rate against the US dollar has fallen for three consecutive months, but it continues to rise against the euro and yen.

In the long term adjustment period of China's economy, the trend of exchange rate volatility has brought a "tense" mood to the market.

The RMB exchange rate has attracted more and more attention in recent years, mainly because the stability of its currency is directly related to whether the whole financial market and price system are "safe" for the domestic market.

For the international market, the renminbi is a relatively scarce and emerging "currency commodity". Many international investors are eager to invest and speculative potential of the commodity in the future.

Current Renminbi

The trend mainly refers to two aspects, one is the trend toward the US dollar exchange rate, the other is the trend of the package currency.

The RMB exchange rate against the US dollar began to show signs of depreciation since the beginning of 2014. On the one hand, China's economic growth slowed down and the US economic data were strong. On the other hand, the renminbi was in a relatively relaxed policy cycle.

However, the renminbi has maintained an upward trend in other major currencies, including the pound, the euro, the yen, and so on.

The fall in the spot rate of RMB against the US dollar is not accidental. From the perspective of China's capital market, the growth rate of foreign exchange growth in China's financial institutions has basically stagnated since last April. In December last year, the foreign exchange balance was 294090 billion yuan, back to the level of eight months ago.

Although this does not represent capital flight, it can be seen that the international competitive environment facing China is undergoing subtle changes.

At present, although Europe and the United States and Japan still maintain a trade deficit with China, the growth rate of exports to China and the competitiveness of the entire manufacturing industry are very obvious.

For example, in 2014, China's auto sales increased by 23 million 491 thousand and 900, up 7% over the previous year, the world's number one in six consecutive years, but the market share of its own brand continued to decline, of which the share of the car market dropped 5.6 percentage points to 2004 levels.

The European Union and Japan mainly import China's low-end manufacturing industries, such as electromechanical products, textiles and raw materials, furniture and toys, which are affected by the appreciation of the renminbi against the euro and yen, and the competitiveness of these export markets is also gradually declining.

In recent years,

With the rapid development of international trade and the stable value of RMB, the core part is still the result of the gradual expansion of China's manufacturing and import and export markets and the creation of huge foreign exchange reserves.

Before China's financial market is open and competitive,

It is still the real anchor of the renminbi.

At the same time, China's PPI (producer price index) has been negative for 34 consecutive months.

If China's manufacturing industry continues to slump, the pressure on the renminbi will be greater, because the market is concerned about what is behind the renminbi, not the renminbi itself.

If we simply look at the trend of the RMB exchange rate, the rate of decline is actually not large. The total decline in three months is less than 2.5%, and the trend of two-way fluctuation is more obvious.

On the one hand, China still has more stringent foreign exchange control. On the other hand, China has maintained relatively high growth rate. "Real estate" and "shadow banking" have not yet detonated systemic risk. The credibility of the whole government can still support global investors' confidence in the RMB.

But we still need to pay attention to that if we do not raise the level of internationalization and long-term attractiveness of RMB from the angle of upgrading manufacturing competitiveness and financial market reform, the cost of maintaining a stable or specific exchange rate will be higher and higher, and the credit risk of the whole Chinese government will also be bigger and bigger.