Why does a persistently high trade surplus lead to an appreciation of the renminbi?

To put it simply, the surplus seems to be profitable, but it is actually a loss....

The exchange rate is the most important adjustment lever in the world. The exchange rate formation mechanism refers to the connection and interaction between the rise and fall of the exchange rate and the change of foreign exchange supply and demand in the foreign exchange market transaction, and it is one of the automatic adjustment mechanisms for the imbalance of the balance of payments. The exchange rate is actually an important means for a country to implement economic regulation and control, reflecting the external value and economic strength of the country's currency, and also directly affecting a country's foreign affairs, capital flows and balance of payments.

Therefore, the appreciation of the national currency due to the surplus is actually an economic means of using the exchange rate to adjust the international balance of payments and the domestic economic situation.

Because the exchange rate is one of the important functions is to adjust the international balance, combined with its formation mechanism, so there will be a large number of surpluses between China and the United States, in order to adjust the balance of payments, and the appreciation of the RMB The US dollar exchange rate will decline, imports will increase, exports will decrease, and the balance of payments surplus will decrease, until the balance of payments is restored.

For the domestic market, if China has a large surplus, the US dollar payment will be used as foreign exchange reserves and then issued to domestic manufacturers, which actually leads to an increase in the amount of domestic RMB, which is reflected in the internal depreciation, that is, inflation - in essence, there is an imbalance between supply and demand between currency and commodities, that is, the amount of currency is greater than the amount of commodities, and at this time, the appropriate implementation of RMB appreciation can adjust the balance of payments on the one hand, and on the other hand, it can enhance the foreign purchasing capacity of the local currency. Expand the amount of imports, through a large number of imported products to supplement the domestic market, until the amount of goods and currency can also reach a balance, stabilize the domestic market price level.

Of course, most of the above analysis is theoretical, but in practice it is much more complicated, and the effect cannot be generalized, and any policy measures have a lag.

Categories: Social Livelihood >> Other Social Topics.

Problem description: Why does the long-term surplus position exacerbate the pressure of RMB appreciation?

Analysis: What is a surplus?

**Surplus is in a certain unit of time (usually calculated on an annual basis), ** of the two sides buy and sell various goods to each other, import and export each other, Party A's export amount is greater than Party B's export amount, or Party A's import amount is less than Party B's import amount, the difference, for Party A, it is called **surplus, on the contrary, for Party B, it is called **deficit.

Generally speaking, in terms of the interests of both parties, the party that gets the surplus is the party that takes advantage, and the party that gets the deficit is the party that suffers. You can look at it this way, ** is to make money. And the side with a surplus is a net profit; The side with the deficit is the net payout.

A larger surplus is not necessarily better, and a surplus that is too high is a dangerous thing, meaning that the growth of the domestic economy is more dependent on external demand than at any time in the past few years, and the dependence on foreign countries is too high. The huge surplus has also brought about the expansion of foreign exchange reserves, which has brought greater appreciation pressure to the renminbi, and has also given the international protectionist forces a pretext that the huge surplus reflects the undervaluation of the renminbi. This has increased the pressure on RMB appreciation and financial risks, and increased the cost and difficulty of reforming the RMB exchange rate mechanism.

The simpler response is to boost domestic consumption.

Assuming that China is a completely free currency market, foreign exchange and RMB are freely convertible in the market, when the surplus leads to excessive foreign exchange, the foreign exchange in the market will be oversupplied, that is, it will not be spent and loaned, then the foreign exchange will be relatively depreciated because no one wants it in the country, and the local currency will appreciate.

But China is not a completely free market, in order to maintain a fixed exchange rate, let the bank buy foreign exchange, so that the supply and demand of foreign exchange are balanced, that is, no matter how much foreign exchange, there will always be a big customer will continue to eat. In this way, there is no need for foreign exchange to depreciate, and there is no need for the renminbi to appreciate. In other words, the pressure of appreciation has always been there, but the banks are carrying it.

However, when banks buy foreign exchange, they will inevitably print the corresponding renminbi and put it in the Chinese market. This makes the domestic currency too much, leading to inflationary pressures, which is the pros and cons that Premier Wen said.

After the appreciation of the renminbi, exports decreased, imports increased, the demand for foreign exchange gradually increased, and the demand for renminbi gradually decreased, so the surplus was narrowed, and the renminbi began to have depreciation pressure.

In other words, theoretically speaking, exchange rate changes can regulate imports and exports between ** countries, so that imports and exports will not be seriously imbalanced.

But in China, the situation is different. China's economy is heavily dependent on exports, which is very uneven, so after appreciation, exports will be hit and companies will face the risk of going out of business. Workers will be unemployed, and society will be in turmoil. This is the reason why China is reluctant to allow the renminbi to appreciate.

As for other influences, there are many opinions on the Internet, and even some professionals may not be right.

For example, some people say that after the renminbi appreciates, foreign exchange reserves will depreciate, but this is nonsense. At home it is depreciated, but abroad, purchasing power has not changed.

Another example is that some people say that after the appreciation of the renminbi, US exports will increase and the deficit will decrease, which is also nonsense. After the renminbi appreciates, other countries with cheaper labor will continue to export to the United States, such as Southeast Asia and India. The appreciation of the renminbi will not help reduce the deficit of the United States.

The real intention of the United States to let the renminbi appreciate is spoken by one person. My view is that after the appreciation of the renminbi, the domestic demand for foreign exchange will fall, and the demand for the renminbi will rise, and at this point the banks will have to continue to buy dollars to prevent further appreciation of the renminbi from leading to the destruction of the export industry.

In other words, I believe that the real purpose of the United States is not to completely destroy China's export industry, but to make China dare not sell dollars. As a result, China will continue to reserve dollars to support the United States.

Therefore, in addition to the appreciation of the renminbi, in addition to affecting the export industry, it will also cause the renminbi issued by China's banks to continue to increase for the purchase of foreign exchange, thus aggravating inflation.

The surplus --- is to point out that the large volume of exports is greater than the volume of imports. The deficit is the other way around. Exports are less than imports.

When exports are too large, a lot of foreign exchange is earned. To put it bluntly, the money of other countries is yours. If you make so much money from others, you will arouse the jealousy of others.

Because everybody knows that you have money here. Everyone wants to take it, but how to get it? The reason why we want to earn other people's foreign exchange is because other people's foreign exchange can be exchanged for a lot of yuan.

That's why I want to earn foreign exchange. But now if someone wants to make us money, they have to use the same method. Increase the exchange rate of our RMB.

On the contrary, it will make the renminbi appreciate faster. Because many people buy it. The consequence of the scramble to hold is to make the renminbi appreciate.

Due to the large inflow of funds, the cavity will use increased liquidity, which is inflationary. It is directly reflected in the price of goods. In the next few years, international hot money will not flow out, because there is still a lot of room for the appreciation of the renminbi.

They haven't earned enough. Until they make enough, inflation remains. The economic bubble is getting bigger and bigger.

It's always going to explode someday.