RMB's "Freedom" May Not Rise Or Fall.

The US Treasury issued a "semi annual report on international economic and exchange policy" released a week ago. It is "unprecedented" that the RMB depreciated from the end of February to March this year. It is considered that if such a depreciation releases the signal that the Chinese government is making the market play a bigger role, it is "particularly worrying".

But the central bank seems to have ignored the US warnings. As of today, the central parity of RMB against the US dollar has dropped for three consecutive days, reporting 6.1610, approaching its lowest level since last September. The spot rate fell to 6.2400 today, reaching a 7 month low.

Moreover, from the perspective of China's opening up of exchange rate, Western experts also believe that the liberalization of RMB may not be as desirable as the US Treasury Department wants, and that if the market forces push forward, the renminbi will be more likely to depreciate rather than appreciate.

Charles Wolf Jr., the Rand Corp. international economics special committee chairman and senior economic adviser, nonprofit research organization listed the following three factors to boost the final devaluation of the renminbi:

1, the Chinese government strives to make the Renminbi the main international reserve and settlement currency, even with the US dollar.

2, in order to get the above equal position with the US dollar, the RMB must achieve full convertibility of capital account.

As long as the exchange rate is fully realized, the proportion of RMB investing in foreign assets, especially US dollar assets will increase. The demand for us dollar assets will be even stronger and the RMB exchange rate will be further pressurized.

3, China's financial institutions have accumulated a large number of balance sheets. Liquidity of deposits 。

China's saving rate is very high. In the middle of last year, Zhou Xiaochuan, governor of the Central Bank of China, mentioned about half of GDP, while the United States accounted for less than 10%.

The above three factors mean that the RMB may be stable within the range of 16-20 cents. As long as China's savings rate is so high, the current account will return to a large surplus.

Wolf thinks, RMB The equilibrium value will reflect the relationship between savings and current account balance, but this relationship will not lead to the equilibrium value of RMB exchange rate.

In other words, the RMB exchange rate will be adjusted according to the future current-account surplus, domestic consumption and economic growth, and will not promote these changes. The so-called accusation of currency manipulation will eventually become an angry statement.

Data from the BIS showed that the real effective exchange rate and nominal effective exchange rate of RMB both increased by 7.9% and 7.2% respectively last year, rising by 2.2% and 1.7% in 2012. However, in the first quarter of this year, the yuan fell by 2.6%, and the quarterly decline was the highest.

This month, many foreign media reported that the United States Treasury Department A senior official said that if the recent fall of the renminbi implied that the Chinese government intended to abandon the RMB exchange rate marketization plan, it would cause serious concern in the United States.

Foreign media believe that the US Treasury's "semi annual report on international economic and exchange rate policy" has made an unprecedented assessment of the fall of the renminbi, which is intended to put pressure on the Chinese government and hope that China will disclose its market intervention more regularly.

Karim Foda, a researcher at Brookings Institution, a famous US Public Policy Research Institute, believes that although the nominal renminbi has fallen by 2.8% against the dollar since the beginning of this year, if it is included in the inflation factor, it will actually drop more, or 3.2%.