Experts: Yuan Depreciation Not a Bad Thing, Flashback: Reserve Depletion Not Alarmist

Chinese media has been relatively quiet on yuan depreciation until now, but talk is starting to pick up. Depreciation articles are out there, but not yet showing up as top articles in the finance section. Last time, there were top headlines asking things like "what happens to home prices if the yuan depreciates?"

The article below is meant to calm investors. The headline says: "experts say yuan depreciation is not a bad thing"

JRJ: 人民币贬值 专家称非坏事

And this decline can not help but remind people of the "811 exchange reform" in 2015, is the pressure of RMB depreciation coming again?

　　"RMB exchange rate movements will be more complex and difficult to unilateral trend." Sun Lijian, vice president of economics at Fudan University to accept the " International Finance represents Times" reporter, said, "Now the dollar trend is not determined by economic fundamentals, It is dominated by the Fed’s monetary policy and trade policy, full of uncertainty.”

..."In fact, the strong dollar is an inevitable phenomenon when the Fed just announced interest rate hikes and the market expects to continue to raise interest rates in the future." Sun Lijian pointed out that "the recent economic fundamentals of the United States support the Fed 's decision to raise interest rates ."

...In the opinion of analysts, the strong performance of the US economy has become the driving force behind the strength of the US dollar. In fact, not only has the renminbi depreciated against the dollar, but almost all non-US currencies have fallen against the dollar.

Depreciation is not a bad thing

"The recent trend of the renminbi is in line with the overall trend of global non-US currency depreciation. A certain degree of devaluation of the renminbi will hedge the various adverse effects of trade friction on enterprises, and may also increase the value of non-US currencies against the US dollar in the future. Space is left behind. After all, trade friction often brings about the depreciation of the dollar.” Sun Lijian pointed out that “the central bank ’s RRR cuts on the one hand buffered the impact of de-leverage on the one hand and the exchange rate depreciation on the other. effect."

　　Bank of China Wang Youxin, a foreign exchange researcher at the International Finance Research Institute, believes that the current round of RMB depreciation is mainly passive, caused by a strong rise in the US dollar index. The misalignment of the monetary policy cycle and the narrowing of the risk-free spread between China and the United States all contributed to the depreciation of the renminbi.

...Van Luu, head of Russell's foreign exchange and fixed income strategy, said that the dollar's rise since mid-April was a technical rebound, not a “structured bull market”. There are signs that the dollar rebound is losing momentum. We maintain a neutral attitude towards the dollar as a whole. In a recent research report , PIMCO's global strategist Gene Frieda pointed out that as other major central banks begin to catch up with the Fed in terms of interest rate normalization, the threat to global economic growth is contained and the dollar is unlikely to strengthen further.

　　The possibility of the renminbi unilateral trend reappearing seems to be small. The China Foreign Exchange Investment Research Institute president Tan Yaling more bluntly, under the renminbi fell below 7 is not a bad thing, but the timing, the rhythm is very important. It is expected that the exchange rate of RMB against the US dollar will increase during the year. This level is in line with the needs of China's economic stage. The RMB exchange rate against the US dollar is around 6.6 yuan, which is conducive to the stability of foreign trade development to the real economy and the market. Risk needs to be guarded.

...The intensification of trade friction has become another major factor in the fluctuation of the foreign exchange market. Li Liuyang, chief analyst of China Merchants Bank, said: "The trade friction between China and the United States and the global trade disputes are far more intense than in previous years. Therefore, in the risk pricing of the exchange rate market this year, trade friction has become an important factor in the emergence of a sudden emergence. This year, Sino-US trade friction is different from the past, and has been upgraded from market competition to model confrontation. The whole trade negotiation process has been quite repeated, and the confidence of import and export enterprises has also fluctuated with the changes in the trade war. On June 15th, the US side After the announcement of the $50 billion tariff collection list, the domestic RMB exchange rate is expected to deteriorate significantly, which has led to a wave of depreciation."

If the trade spat intensifies, the yuan could depreciation. If the dollar is in a structural bull market, then USDCNY is headed to 7 or higher. After that, it is a matter of expectations as Tan Yaling says. She isn't concerned yet because there are no signs of depreciation expectations, but that could change.

Tan Yaling is also not one to mince words. Six years ago she warned that China's reserves could be totally exhausted if it did not change its development path. Original Chinese article: 外汇会耗尽不是危言耸听

外汇会耗尽不是危言耸听

　　中国外汇投资研究院院长 谭雅玲

　　不久前有文章指出，中国3万多亿美元的外汇储备，无法为中国经济提供庇护。今后如果中国只能继续推动投资，没有其他办法维持经济增长，那么五年内中国的外汇储备都将被耗完。这一忠告值得重视。

　　首先，这种“危言耸听”给中国经济现阶段的稳定敲响了警钟。目前我国市场上投机套利非常严重，这种投机状态不仅不利于发展，反而会消耗过去的积累，浪费储备资源，使中国外汇储备缩水及外汇储备耗尽存在着很大的可能性。由于市场精气神高度集中投机套利，而非发展实体和实业，再加上监管方面的缺陷，为热钱提供了炒作的空间和造势的平台。于是，这种投机套利行为被热钱利用，使来之不易的外汇储备被自己的盲从行为所消耗。

　　因此，我们的外汇储备虽然实力雄厚，但这种规模并不足以抵挡国际对冲风险。我们目前拥有3.2万亿美元外汇储备，而国际外汇市场一天的外汇交易量就高达5-6万亿美元，我们的规模阻挡不了热钱的投机炒作。如果没有自己的发展策略和风险识别力，没有综合和长远的战略规划，外汇储备将会很快被花掉、被毁掉，最终消耗殆尽。

　　其次，藏汇于民战略依然步履艰难。我国关于外汇储备的话题已经持续10多年，但至今焦点依然停留在原点：外汇储备数量太多，效率不足。我国虽然拥有全球最多的外汇储备，却是全球较小的外汇市场，甚至外汇市场并未全面开放。

　　目前，我国的金融改革与发展处于重要关口。一方面，我们拥有巨额外汇储备，国家财富的象征引起世界关注和投机者的追逐。另一方面，我国央行对冲成本加大，外汇资产价格与价值缩水的担忧正在增加，拒绝或减少美元资产成为一种潮流和趋势，这种民间和社会过于短期、简单的认知和需求，将直接影响我国藏汇于民的战略实施和进程。在前所未有的金融危机大背景下，人们的这种思维方式是我们藏汇于民战略失落的最大阻力所在。

　　可见，这种“危言耸听”实际警示我们，我国外汇储备的问题表现在三个方面：一是对数量关注多，而不重视效率发挥；其二是短期价格过多，长效制度不够；其三是短期对策过多，实际效果不行。结果，规模巨大的外汇储备成了我国简单的实力摆设或负担、包袱，并未对我们改革、建设和发展完全发挥出其促进作用。因此，我们应参考已经做过的对策，以注资、投资和特殊金融政策工具对应我们的改革和发展需要，减少市场投资行为，防范热钱侵扰；同时可以考量外汇与人民币衔接机制，破解拘谨于外汇储备教条化的被动局面，灵活而有效地解决自己的经济金融问题

Foreign exchange will be exhausted and not alarmist
August 24, 2012 06:03

　　Tan Yaling, Dean of China Foreign Exchange Investment Research Institute

　　Recently, an article pointed out that China's foreign exchange reserves of more than 3 trillion US dollars cannot provide shelter for the Chinese economy. In the future, if China can only continue to promote investment and there is no other way to maintain economic growth, then China’s foreign exchange reserves will be exhausted within five years. This advice deserves attention.

　　First of all, this "risk alarm" has sounded the alarm for the stability of the Chinese economy at this stage. At present, speculative arbitrage in China's market is very serious. This speculative state is not only unfavorable for development, but will consume the accumulation of the past and waste the reserve resources. There is a great possibility that China's foreign exchange reserves will shrink and the foreign exchange reserves will be exhausted. Due to the high concentration of speculative arbitrage in the market, rather than the development of entities and industries, coupled with regulatory shortcomings, it provides a space for speculation and a platform for speculation. As a result, this speculative arbitrage behavior is used by hot money, so that the hard-won foreign exchange reserves are consumed by their blind behavior.

　　Therefore, although our foreign exchange reserves are strong, this scale is not enough to withstand international hedging risks. We currently have 3.2 trillion US dollars in foreign exchange reserves, and the foreign exchange market has a daily foreign exchange volume of 5-6 trillion US dollars. Our scale can't stop the speculation of hot money. Without their own development strategies and risk identification, without comprehensive and long-term strategic planning, foreign exchange reserves will soon be spent, destroyed, and eventually exhausted.

　　Secondly, the strategy of collecting foreign exchange in the people is still struggling. The topic of foreign exchange reserves in China has been going on for more than 10 years, but the focus remains at the original point: the amount of foreign exchange reserves is too large and the efficiency is insufficient. Although China has the largest foreign exchange reserves in the world, it is the world's smaller foreign exchange market, and even the foreign exchange market is not fully open.

　　At present, China's financial reform and development is at an important juncture. On the one hand, we have huge foreign exchange reserves, and the symbol of national wealth has attracted the attention of the world and the pursuit of speculators. On the other hand, China’s central bank’s hedging costs have increased, and concerns about the price and value of foreign exchange assets are increasing. Rejecting or reducing dollar assets has become a trend and trend. This kind of civil society and society are too short-term, simple cognition and demand. It directly affects the strategic implementation and progress of China's Tibet and the people. In the context of the unprecedented financial crisis, people's way of thinking is the biggest obstacle to our loss of the Tibetan strategy.

　　It can be seen that this "risk-sounding" actually warns us that China's foreign exchange reserves are manifested in three aspects: first, paying more attention to quantity rather than efficiency; second, short-term price is too much, and long-term system is not enough; There are too many short-term countermeasures, and the actual effect is not good. As a result, the huge foreign exchange reserves have become China's simple strengths, burdens and burdens, and have not fully played a role in promoting our reform, construction and development. Therefore, we should refer to the countermeasures that have been made to capitalize on investment, investment and special financial policy tools to meet our reform and development needs, reduce market investment behavior, and prevent hot money intrusion; at the same time, we can consider the mechanism of foreign exchange and RMB convergence, and crack the restrictions on foreign exchange. Reserve a dogmatic passive situation to solve your own economic and financial problems flexibly and effectively.