Resurgence Of Mercantilism And The Resurgence Of RMB

< p > first look at the facts: since hitting the highest point in January 14, 2014 to April 25th, the RMB exchange rate against the US dollar has fallen by 3.4%. Since the abolition of the RMB dollar peg policy in July 21, 2005 and the introduction of the so-called "managed floating" mechanism, the renminbi has appreciated by 37%. If compared with 2005, the yuan still appreciated by 32.5%. < /p >
< p > during this period, the situation of China's < a href= "//www.sjfzxm.com/news/index_c.asp" > balance of payments < /a > has changed significantly. The current account surplus, the most significant indicator of currency undervaluation, fell from 10.1% of GDP in 2007 to 2.1% in 2013. According to the latest forecast of IMF, China's current account surplus will account for about 2% of GDP in 2014. < /p >
Below P, it is ridiculous for US officials to make a fuss over the recent devaluation of the renminbi. At present, China's balance of payments has been quite balanced. Therefore, we have every reason to believe that since the appreciation of RMB nearly 1/3 in 2005, it has been very close to "fair value". < /p >
It is a classic case of political denial that the United States should seize the RMB issue, P. American workers are faced with double pressures to keep jobs and real wages down. Under this background, the situation of American politicians is quite embarrassing. Their response is to claim that the US's long-term trade deficit is China's fault, and accusing China of currency manipulation is the downside of the middle class situation in the US. < /p >
< p > this is a good political pretext, but unfortunately this is not the case. The US trade deficit is a multilateral imbalance for many countries, rather than a bilateral issue with China. Moreover, the root of the trade deficit is not the so-called Renminbi manipulation, but the simple fact that Americans do not save. < /p >
Less than P, the United States has insufficient domestic savings and wants to develop its economy. Naturally, it has to import surplus savings from abroad and maintain huge current account deficits to attract foreign capital, which has led to multilateral trade imbalance in the United States. Yes, trade between the United States and China is the largest component of the trade imbalance in the United States, but this mainly reflects the complexity of the transnational supply chain and the benefits of offshore efficiency solutions. < /p >
< p > we must face the fact that the United States will attack China sooner or later because of political motives. If the United States fails to solve its lack of savings, the current account deficit will always exist. This means that the reduction of China's external imbalance in the US will inevitably bring about a rise in the proportion of third countries. More importantly, the third country is likely to be more expensive than the Chinese made, and the final effect is equivalent to a tax increase on the already overburdened middle class. < /p >
P, China is transforming itself into a more dependent domestic growth mode. The US government should stop chattering on the issue of RMB and turn to the opportunities it will bring. This means emphasizing the participation of US companies in China's domestic goods and services market. Pushing forward the signing of bilateral investment agreements and relaxing the restrictions on foreign ownership will be an important step in this direction. < /p >
Similar to P, the United States needs to recognize China's initiatives to further promote the reform of < a href= "//www.sjfzxm.com/news/index_c.asp" > currency < /a >. In mid March, the RMB to us dollar day trading range expanded to + 2%, which is an important step to loosen the managed floating regulation. The move and the devaluation of RMB in recent months have sent a strong signal to speculators: bet on the unilateral appreciation of the renminbi is dangerous, which helps to curb the inflow of hot money. It is the influx of hot money that interferes with China's liquidity management and exacerbates the volatility of China's "a href=" http:// www.sjfzxm.com/news/index_c.asp "asset market < /a >. < /p >
< p > there are two views on the future of Sino US economic relations: one sees only risks and the other sees opportunities only. Entangled in the depreciation of the renminbi is the first type: it ignores the rebalancing and reform that China has already undertaken, and also prevents the United States from paying attention to rectify its most serious long-term macroeconomic problems - lack of savings. < /p >
On the contrary, P regards China as an opportunity to meet the rebalancing needs of the United States itself, reinventing the competitiveness of the United States and striving to gain a larger share of China's upcoming surge in domestic demand. Unfortunately, achieving this point will require a rise in US savings, which is now completely submerged in the denunciation of the renminbi. < /p >