Increasing Pressure On Currency Substitution And Speeding Up Foreign Exchange Management Reform

< p > relative to the consensus of social reform on the marketization of interest rates, exchange rate reform is faced with great pressure. With the increasingly prominent contradiction in the implementation of the monetary policy of the central bank, exchange rate reform needs to be more deeply deepened.

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Doubts and suspicions aroused by China's huge foreign exchange reserves are growing. < p >

To this end, the central bank has recently proposed various measures to deepen the reform of the foreign exchange management system.

On the corresponding pilot, the pilot operation of centralized operation and management of foreign exchange funds at the headquarters of the pnational corporations of the Shanghai free trade zone was officially launched.

In May 22nd, the central bank issued the detailed rules for the implementation of the Shanghai free trade area accounting and accounting risk management, and so on.

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(P) the central bank has declared its position on different occasions, and this year will continue to deepen the reform of the financial system and enhance the efficiency of financial operation and the ability to serve the real economy.

We should further promote the marketization of interest rates and the reform of the RMB exchange rate formation mechanism so as to keep the RMB exchange rate basically stable at a reasonable and balanced level.

Therefore, from the policy debates of the private sector to the official position of the government, huge foreign reserves have increasingly become the trouble of the Chinese economy, and how to lose weight is becoming more and more urgent.

Although there are various concerns and divergences about the specific steps of foreign exchange reform in the academic circles, accelerating the reform of the foreign exchange management system has become a major breakthrough in reversing the current macro financial regulation and control in China.

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China has been suffering from the shortage of foreign exchange for a long time. In the 50s and 60s of last century, "export earning foreign exchange" has attracted much attention. So far, it seems that P has formed a tradition.

Until now, the earning foreign exchange economy is still a major target of China's foreign trade.

In the past, high foreign exchange reserves were considered to help enhance international solvency, resist the risk of international financial turbulence, maintain exchange rate stability and enhance national credibility.

However, with the continuous accumulation of foreign reserves, the situation has turned over. The negative effects of huge external reserves have surpassed its positive effects, and marginal cost exceeds marginal revenue.

Criticism from all walks of life is increasing.

As a developing country, China has such a high level of foreign reserves, mostly in the form of US dollar assets, which also causes confusion in "poor countries lending money to rich countries", and also raises doubts about China's ability to manage foreign reserves. It also gives some international public opinion accusations that China is aggravating international economic imbalances.

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< p > if all sectors of the society analyze the impact of foreign exchange reserves on China's economy and finance from a foreign exchange perspective, then a problem that can not be ignored is that in addition to China's foreign trade development strategy, which has been implementing the foreign exchange earning strategy in the past, it is also closely related to the international monetary system dominated by the US dollar in the world today.

Especially for developing countries, in the course of economic development, the globalization of economy and finance will inevitably lead to the substitution of domestic currency. A typical example is the dollarization of Latin American countries.

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"P", a large number of developing countries, due to the small economic scale, the domestic currency inevitably appears in the problem of dollar substitution, but for China, with the improvement of the economic development level, its market size is huge, the huge economic volume will urge the RMB to become a global currency, and in this process, the phenomenon of currency counter substitution appears.

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< p > the so-called "currency counter substitution" refers to the fact that in the course of economic development of a country, residents are generally optimistic about the value of the local currency under the strong and appreciation trend of their currencies, or change the preference of the foreign currency when the local currency assets yield is significantly higher than the foreign currency asset yields, thereby dumping foreign currency assets, holding local currency assets and making foreign currencies too centralized in the central bank's behavior and phenomena.

To a certain extent, the emergence of the phenomenon of "currency counter substitution" is a unique financial phenomenon in the process of China's economic pformation.

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< p > the current foreign exchange management system has played an important role in the increase of China's foreign exchange reserves.

However, under the pressure of a href= "http://www.91se91.com/news/index_cj.asp" > foreign exchange reserves < /a >, the endogenous mechanism of the central bank's basic currency has made M2/GDP grow rapidly, especially now that it has become the largest M2 issue in the world.

This has also led to controversy over currency and worries about foreign inflation.

On the one hand, the central bank effectively manages foreign exchange inflow through the system of selling foreign exchange, and on the other hand, in order to cushion the upward pressure on domestic prices caused by the sharp increase in foreign exchange reserves, the central bank has hedged foreign exchange by issuing central banks.

The fact that commercial banks get the central bank votes to make the a href= "http://www.91se91.com/news/index_cj.asp" > currency < /a > has not actually increased, nor does it take part in the creation of GDP, which has led to the rapid increase of M2/GDP.

In addition, the exchange of foreign currencies has also brought challenges to China's currency issuing mechanism. Especially when the foreign exchange balance is as high as 29 trillion and 500 billion yuan, it has become the absolute majority of China's basic currency, while the domestic money supply has been severely shrinking.

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< p > by the above analysis, we can see that < < a href= "http://www.91se91.com/news/index_cj.asp > > currency substitution /a > has produced more and more dilution effect on China's macroeconomic regulation and control.

Due to the counter substitution effect of RMB against foreign currencies, the pressure of RMB appreciation continued to rise.

Moreover, the phenomenon of counter substitution has further exacerbated the imbalance of China's balance of payments.

Since 2001, China's balance of payments has been showing a "double surplus" trend, of which the capital account surplus is relatively large, largely due to the large increase in short-term external debt. The larger the balance of payments surplus and the greater the foreign exchange reserves, the more obvious the herd effect in the international market. This makes the RMB exchange rate appreciation pressure higher and the balance of payments imbalance increasing.

Although this year's continued depreciation of the RMB exchange rate has made arbitrage less, but the appreciation is still strong expectations.

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Excessive monetary substitution will destroy China's economic and financial ecology, and even lead to industrial structure deformities. From the perspective of macroeconomic regulation and control, it weakens the implementation effect of macroeconomic regulation and control such as monetary and fiscal policies. At the same time, the excessive substitution of currency will impede the economic growth of a country and hamper the process of RMB internationalization. P

It is particularly necessary to emphasize that capital inflows and exits caused by currency substitution are bound to bring great impact to China's economy, and will inevitably impact on exchange rate, stock market and real estate market. Therefore, we must attach great importance to it.

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From the point of view of currency counter substitution, to solve the problem of currency and macro financial regulation and control, I think we need to start from the following aspects: first, speed up the reform of foreign exchange management, accelerate the opening of capital account, and reverse the development of foreign exchange economy in the direction of foreign trade development strategy. P

As early as 2012, the research group of the people's Bank of China Investigation and Statistics Division published two reports on China's capital account liberalization.

The Shanghai and Hong Kong through project released last month has also taken a positive step in capital liberalization.

But there are also differences.

Secondly, we should improve the multi-level capital market, gradually open the stock, bond, commercial paper, futures and other markets, and inflow capital into China in order to make it serve the real economy rather than blow up the stock market bubble and create financial security risks.

In addition, we should consider changing our existing currency issue system.

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