On July 21, the reform of the RMB exchange rate formation mechanism ushered in 6 years of age. In the past six years, the fluctuation and flexibility of the RMB exchange rate have increased. With the current economic slowdown and the large increase in the renminbi against the US dollar, the future trend of the renminbi will affect the people. Experts believe that the RMB exchange rate fluctuations can be appropriately expanded to further increase the RMB exchange rate flexibility to cope with the new changes in the international and domestic economic and financial situation.

Toward a Balanced Balance Since July 21, 2005, China has begun to implement a managed floating exchange rate system based on market supply and demand, with reference to a basket of currencies. Over the past few years, the reform of the RMB exchange rate formation mechanism has proceeded in an orderly manner, achieving the desired results and playing an active role.

During this period, the People's Bank of China announced on May 18, 2007 that since May 21, the floating range of the RMB-US dollar trading price in the inter-bank spot foreign exchange market has increased from three-thousandths to three-thousandths.

After the end of July 2008, when the international financial crisis was most serious, many countries’ currencies depreciated sharply against the U.S. dollar, and the RMB exchange rate remained basically stable. It played an important role in resisting the international financial crisis and made a recovery for Asia and even the global economy. The huge contribution also shows our country’s efforts to promote the global economic balance.

Since 2010, the global economy has gradually recovered, China’s economic recovery has been further consolidated, and its economic operation has stabilized. The People’s Bank of China announced on June 19, 2010 that it will further promote the reform of the RMB exchange rate formation mechanism and enhance the exchange rate of the RMB. elasticity.

Chen Daofu, director of the Comprehensive Research Office at the Development Research Center of the State Council, believes that since the exchange rate reform, the fluctuation and flexibility of the RMB exchange rate have increased, and the RMB exchange rate has gradually tended toward a balanced price, laying the foundation for other reforms.

Liu Shuhui, an expert from the Academy of Social Sciences, said that the exchange has changed its goal of establishing a managed floating exchange rate in China and has also relaxed the fluctuation range of the RMB exchange rate. However, the expectation of a unilateral appreciation of the renminbi has not fundamentally changed. The biggest change is reflected in the appreciation of the renminbi against the US dollar, which has seen a 25% to 30% appreciation. He believes that because there is no fundamental change in the overall macroeconomic mechanism behind the exchange rate of RMB, there is no way to eliminate the appreciation.

It is worth noting that since the reform of the RMB exchange rate formation mechanism was further promoted in June last year, although the RMB has risen by more than 5% against the US dollar, the real effective exchange rate of the RMB has depreciated by 2.29%.

Reform enters the "deep water area"

By matching exchange rate policies with structural policies, alleviating inflationary pressures and optimizing the allocation of resources are important components of exchange reform. In the past six years, the RMB exchange rate reform has played a positive role in expanding import support for domestic demand and promoting the allocation of more resources to the domestic demand department.

However, under the current background of a possible slowdown in economic growth, a series of issues such as strong appreciation expectations, hot money inflows, and continued appreciation of exports have also raised questions about the exchange rate policy.

Ding Zhijie (microblogging), dean of the School of Finance of the University of International Business and Economics, believes that the negative impact of the appreciation of the renminbi on China’s exports and employment has been tangled up by policy makers, but there are many misunderstandings about the impact of exchange rate changes.

He believes that the short-term effects of changes in the exchange rate of the RMB have been exaggerated, especially in terms of GDP and employment, but long-term effects have been negligent, such as the effects of economic structure. The impact of the revaluation of the RMB on the return to the equilibrium level will have more impact on the trade sector. It will be short-term. In the medium and long term, the appreciation pressure will promote the upgrading of the industrial structure and will enable the Chinese economy and commodities to regain international competitiveness on a new higher platform. .

Liu Yuhui believes that the issue of the exchange rate of the renminbi is actually a structural issue of the macro economy. The current huge appreciation pressure stems from the fact that China’s rapid economic growth and labor productivity have accelerated over the years. The current exchange rate problem in China can be explained by the “Balassa-Samuelson effect”. The appreciation of the real exchange rate = the appreciation of the nominal exchange rate + the difference between domestic and foreign inflation.

He said that due to the rapid economic growth driven by economic investment in our country, the demand for real exchange rates has risen. However, if the nominal exchange rate cannot be effectively increased, it will inevitably lead to an increase in inflation. Therefore, the current exchange rate of the renminbi is in a paradoxical state of “appreciation of foreign value and internal devaluation.”

He said that on the one hand, China’s economic development needs to slow down and government investment must be effectively constrained. On the other hand, we can start from the right side of the equation, that is, suppress the inflation through the appreciation of the nominal exchange rate, but the specific effect depends on the internal institutional factors of the economy. If the nominal exchange rate rises and resources are transferred from the trade sector to the non-tradable sector, the non-tradable sector can play a role in suppressing prices.

However, judging from the domestic reality in China, the rise in the real exchange rate not only does not restrain inflation, but even exacerbates inflation. Because the funds transferred from the trade department have not been gone, they can not enter the non-tradable sector very quickly, because there is a strong monopoly in some non-tradable sectors, which inhibits the investment of private capital. As a result, the direct flow of funds into the virtual economy, such as land, real estate and other areas, has evolved into a new inflationary pressure.

Liu Yuhui said that the current economic slowdown is a manifestation of the law of economic development. Moreover, the economic slowdown, from a microscopic point of view, can depressurize the pressure on the continued appreciation of the renminbi, and the renminbi appreciation is expected to decline as the economy slows down.

Ding Zhijie also believes that the appreciation of the RMB exchange rate is not a tool for managing inflation, but it has the effect of curbing inflation. The appreciation of the renminbi is an important reason for the inflow of hot money. Currently, hot money inflow control should be strengthened.

Can the volatility be appropriately expanded. Where will the RMB exchange rate go in the future? Observing the current exchange rate level seems to be difficult to determine.

Although the unilateral appreciation of the renminbi is still expected, Chen Daofu said that currently in the external market in Hong Kong, the renminbi does not show strong expectations of appreciation, and in some cases it even depreciated, and the international market also has the voice of shorting the renminbi. In reality, the RMB exchange rate has gradually approached the equilibrium of the market.

Liu Yuhui also believes that whether the current nominal exchange rate of the renminbi is balanced or over-adjusted cannot be concluded yet. Because it is difficult to judge whether the exchange rate adjustment is in place under short-term pressure, it is not even possible to rule out the possibility that the current renminbi value is overvalued.

However, both scholars have stated that it is appropriate to expand the renminbi volatility.

Chen Daofu pointed out that the flexibility and flexibility of the RMB exchange rate should be further enhanced. It is now possible to expand the amplitude properly. In the first half of 2011, China's cumulative surplus was 44.93 billion U.S. dollars, and FDI (the actual use of foreign capital) was 60.891 billion U.S. dollars. The balance of foreign exchange as of the end of June reached 24.67 trillion yuan, compared to 2010. At the end of the year, it increased by RMB 2,088 billion. In other words, a considerable part of this funding is not under the trade or FDI items. Therefore, financial factors have taken an increasingly important share in exchange rate fluctuations. In the future, if China still wants to stimulate economic development, it must still insist on a gradual and gradual process of appreciation.

He said that a certain economic downturn is a must for the economic restructuring process. Therefore, the exchange rate needs to have appropriate flexibility, reflecting the financial fluctuations in domestic and international markets. Moreover, in order to withstand international economic fluctuations, China should appropriately increase the volatility of the RMB exchange rate. At present, the international financial market is still unstable. In particular, we must consider the situation of US government debt defaults and fiscal deficits. China cannot bring too many international negative factors into the country.

Chen Daofu believes that the impact of renminbi fluctuations on exports is twofold, and the flexibility of the exchange rate should be increased. It may not necessarily be an appreciation or a devaluation. Moreover, if the renminbi appreciates slightly, the relevant departments should also cooperate with the means of risk management of exchange rate fluctuations, thereby enhancing the ability of domestic enterprises to resist exchange rate risks.

Liu Yuhui pointed out that the renminbi's volatility should be appropriately expanded, and reasonable exchange rate fluctuations will bring the renminbi exchange rate closer to equilibrium. As China's current economic growth and investment growth are still relatively fast, the renminbi's volatility also needs to be relaxed. As the RMB exchange rate gradually reaches an equilibrium point, even if the exchange rate mechanism is liberalized, the value of the RMB currency will not fluctuate greatly, but will be determined by the supply and demand of the market.

In addition, Ding Zhijie stated that the appreciation of the renminbi, which currently adjusts to the equilibrium level, will not become the root cause of the new crisis, but it is necessary to prevent the right thing from being done at the wrong time.

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