A Moderate Depreciation Of The Renminbi Is Not An Option.

For the medium term trend of the RMB exchange rate, there are obvious differences in the recent market, and there are different views on the pros and cons of appreciation or depreciation.

One view is that the RMB exchange rate should be relatively strong in the medium term. There are several reasons for this:

First, the internationalization of the renminbi and the renminbi becoming an important reserve currency need a relatively strong exchange rate as a support.

From the overseas experience, the main currencies in the process of internationalization are strongly dependent on the strong exchange rate.

In addition, because capital is profit driven, a strong Renminbi helps attract capital inflows and reduce capital outflow risk.

Second, the capital export plan such as "one belt and one road" needs a strong RMB exchange rate as a support.

Third, a relatively strong Renminbi helps to boost productivity in the real economy sector and share dividends from crude oil and other commodities.

Fourth, once the depreciation is allowed, it is possible to form a sustained expectation of devaluation of the renminbi, thus bringing about the positive feedback resonance of capital outflow and depreciation expectations, which will outweigh the gains.

If the depreciation of the RMB is too much, it will have a huge negative impact on cross-border debt exposure. If the depreciation is too small, it will not be effective at all. Why should we depreciate?

In view of those who hold such views, because China has huge foreign exchange reserves, it is possible for the monetary authorities to maintain a strong exchange rate if they want to.

In addition, the expansion of the sluggish trade surplus caused by the economic downturn in China does not constitute a strong support for the strengthening of the renminbi, but it also blocks the expected depreciation of the current account surplus.

However, there is another view in the market, that is, the devaluation pressure of the RMB in the medium term, the normal devaluation pressure should be released, and timely policies should be adopted to intervene the RMB continuously.

Expect.

After all, the changes in the domestic and international economic situation make the RMB no appreciable revaluation. Because the strong US dollar, the rising interest rate of the US dollar and the devaluation of currencies such as Europe, Japan and other currencies are a big probability event, if we maintain a strong RMB, the cost will be great.

Strong renminbi will continue to push up the already high RMB real exchange rate, thus making the export sector.

Further decline is not conducive to improving foreign trade.

In addition, if the RMB keeps strong against the US dollar, the higher interest rate of the US dollar will have an impact on the autonomy of the domestic interest rate policy.

In the case of stronger assets of the RMB exchange rate, if China's interest rate level further falls, the exchange rate of RMB against the US dollar will be under a certain pressure of depreciation, and it may also make domestic capital flows more attractive.

Valuation assets.

This is evident from the market performance since the interest rate cut.

Therefore, to maintain the strength of the RMB, it is necessary to maintain a certain Sino US interest rate difference.

However, China's economic growth is in a downward channel, low inflation and huge debt pressure, which requires monetary policy to gradually relax to lower interest rates.

In the short term, maintaining an independent interest rate policy is more important than maintaining a strong exchange rate.

In the complex internal and external situation, it is difficult to have the perfect choice of getting rich and prosperous.

It should be said that the above two kinds of views are very reasonable and not completely antagonistic. The policy authorities should strive to maintain the overall stability of the RMB exchange rate, but do not have to hinder the trend of devaluation.

In the future, the formulation of the RMB exchange rate policy needs to pay more attention to the changes and needs of capital account than before. However, it is not necessary to categorically exclude the possibility of expanding the space for interest rate policy and exchange rate policy through the short and medium term depreciation.

The RMB exchange rate reform aims to achieve two-way fluctuation of exchange rate, which does not exclude the trend of depreciation. It is only necessary to resolutely prevent the sustained depreciation expectations.