Why does the depreciation of the renminbi lead to short term capital constraints?

A sharp appreciation of the renminbi is easy to lead to a "lose-lose" Lin Yifu reminded that if the exchange rate of the renminbi appreciates sharply now, many enterprises engaged in import and export can understate the imported raw materials and intermediate products and overreport the final export products to inflate the surplus to arbitrage the income of exchange rate appreciation, and the current account surplus will expand. Foreign exchange reserves increase even more when both current account and capital account surpluses widen. Moreover, China's current overcapacity situation has been quite prominent, if the exchange rate appreciates sharply, it will make the situation of overcapacity worse, and may even lead to serious deflation.

Moreover, compared with Japan and Taiwan, China in the 80s of the last century, China's enterprises generally have a low level of management, low efficiency, and rely on bank loans for investment a lot, and if there is serious deflation, corporate profits will drop sharply. Even if it only appreciates by 20 percent, many businesses will go out of business. At this time, the bad debts of banks that have been suppressed with great difficulty may quickly lead to an economic and financial crisis.

If this is the case, there will be capital flight and foreign exchange reserves could fall significantly. Lin Yifu said: At this time, there is a dangerous tendency for international financial speculators to speculate on the depreciation of the renminbi on the grounds that China's financial system is not sound, the proportion of bad debts of banks is high, and there are many hidden social debts. For China, to cope with the pressure of appreciation, it is only necessary to issue additional RMB, so it is relatively easy; To cope with the pressure of depreciation, it is necessary to use foreign exchange reserves to stabilize the value of the currency, and there is always a possibility that foreign exchange reserves will be used up, and it is relatively difficult to deal with them.

Therefore, when the value of the renminbi is not seriously undervalued and the domestic economy is not high, to eliminate the speculative pressure of international speculators with a sharp appreciation will play into the hands of speculators, and the national economy will pay a huge price for this, and may even lead to an economic crisis. Lin Yifu also reminded that before the pressure of RMB speculation disappears, foreign financial speculators may use some legal channels in China's capital account control, such as investing in China's real estate, to carry out dual speculation on the RMB exchange rate and real estate. Therefore, China needs to carry out the necessary control over real estate speculation to prevent the bubble of the real estate industry.

1. Yes. 2. The depreciation of the renminbi is a practice of the country to stimulate the economy under the financial crisis, which is conducive to increasing export competitiveness and maintaining economic growth. In the context of the general recession of the global economy, China has acted as a safe haven to promote the inflow of foreign capital.

3. The depreciation of the renminbi to prevent the flight of domestic capital;

4. The depreciation of the RMB is a response to the financial crisis, after the financial crisis eases and the domestic industrial structure is gradually transformed, the value of the RMB will naturally rise, and the RMB will still be favored by investors (speculators), and it is also the best time to inhale the dip.

There are a number of factors that contribute to the continued depreciation of the renminbi. First, slowing economic growth could lead to currency depreciation. When a country's economic growth slows, investors may reduce their demand for the country's currency, leading to a depreciation of the currency.

Second, an imbalance could also lead to a depreciation of the RMB. If a country's exports exceed its imports, then the country's currency will be under pressure to depreciate. In addition, fluctuations in the international financial market and changes in international monetary policy may also have an impact on the RMB exchange rate.

There are different views on whether there is a need to worry about the continued depreciation of the renminbi. On the one hand, the depreciation of the renminbi may have an impact on imported goods**, which may lead to an increase in inflation. In addition, the depreciation of the people's currency may also increase the cost of foreign debt, which will put some pressure on the national economy.

As a result, some see the depreciation of the renminbi as a concern.

On the other hand, the depreciation of the renminbi also has some positive effects. First of all, the depreciation of the renminbi can enhance export competitiveness, promote export growth, and have a positive effect on the export-oriented economy. Second, the depreciation of the renminbi will help increase foreign exchange reserves and improve the balance of payments.

In addition, the depreciation of the renminbi can also attract foreign capital inflows and promote economic development. As a result, some argue that a depreciation of the renminbi is not necessarily a negative issue.

When analyzing the problem of the continued depreciation of the renminbi, it is also necessary to take into account the international economic environment and the monetary policies of other countries. If other countries also adopt a depreciation policy, then the depreciation of the renminbi may be a normal market reaction. In addition, the fluctuation of the RMB exchange rate can also be seen as a reflection of the market supply and demand, reflecting the market demand and supply of the RMB.

Therefore, there is no absolute answer to whether there is a need to worry about the continued depreciation of the renminbi. It is necessary to comprehensively consider various factors, including economic growth, ** conditions, monetary policy and international economic environment, etc., to assess the impact of RMB depreciation on the national economy.

What will be the impact of the continued depreciation of the RMB?

First of all, if the RMB depreciates, then our domestic prices will rise wildly, and the depreciation of the RMB represents the relative appreciation of foreign currencies, so if it is a commodity denominated in a foreign currency, it will become more expensive, don't think that if we don't go abroad to buy things, it will not be affected, in fact, in today's globalization, basically everything we use has foreign factors, so the depreciation of the RMB, we will be in the import of goods will be substantial, such as soybeans, natural gas, etc., and these things, It will also drive the **** of other products, so for us, the cost of living will also increase.

Secondly, the depreciation of the renminbi is conducive to the survival and development of China's export enterprises, simply put, we will spend more money to buy imported products, but if we export, it will be more advantageous, so as to enhance the competitiveness of enterprises in the international and domestic markets.

Again, in principle, depreciation is conducive to exports, but due to the J curve effect, it takes time for the market to react to the meeting, so the depreciation of the RMB is extremely unfavorable for export enterprises in the short term, especially the RMB, if it depreciates sharply in a short period of time, it may cause a number of enterprises to close down, resulting in some people unemployed, so if the RMB continues to depreciate, it is bad news for domestic enterprises.

Finally, in fact, the depreciation of the RMB has a greater impact on our lives, which means that we will spend more money to buy the same thing, which will also have a negative impact on the people studying abroad and shopping, due to the decline in the RMB exchange rate, it may cost more RMB than the original in studying abroad and shopping, which will increase the cost of studying abroad and shopping.

Therefore, if the RMB exchange rate continues to depreciate, the negative impact on China's economy and people's lives is huge, and the relevant state departments should study the response plan to prevent the excessive depreciation of the RMB exchange rate, so as to stabilize the domestic economy and people's lives.

Affect the performance of some companies, lead to the exchange rate**, the decline of the international status of the RMB, the income of some import and export companies, and the impact on the macroeconomy.

It affects the living environment, the quality of life, income, consumption level, purchase desire, and GDP per capita

The depreciation of the renminbi shows that the country is facing inflation, which may lead to prices**, and in serious cases, it will affect people's basic living standards.

To fight against devaluation, we should convert all the RMB in our hands into a universal currency in a timely manner, which is the most powerful currency inflation.

This will certainly lead to capital outflows, as well as a corresponding depreciation of our domestic assets.

The main reason for this is that the depreciation of the renminbi mainly means that the purchasing power of the renminbi has decreased. After this phenomenon occurs, we will find that the a**field has gone out of the current ****, and some **** has even exceeded 20%. Prior to this, because the exchange rate of the renminbi has always been stable, no one expected that the exchange rate of the renminbi would reach around so quickly, so this situation will affect the confidence of the capital market.

The renminbi continues to depreciate.

In the process of RMB depreciation, we have not only found that the purchasing power of the RMB has gradually decreased, but also that the performance of the capital market has become worse and worse. Especially on September 15, when the exchange rate of RMB reached for the first time, the market value of our A** market fell directly by 5%. For some sectors, the decline in some sectors is close to 10%.

This can lead to an outflow of funds.

The reason is actually very simple, the reason why the RMB will continue to depreciate is related to the exchange rate demand of the RMB itself, and also related to the Fed's interest rate hike. Especially for the latter, when the Fed repeatedly raises interest rates, we can see that the dollar index is further strengthened, if the dollar index reaches a high of 100 points, this phenomenon not only means that the dollar is becoming more and more attractive, but also means that many currencies, including the yuan, will gradually depreciate, but also means that there will be a large outflow of capital. <>

Finally, even though our renminbi is constantly depreciating, we are not raising interest rates to increase the purchasing power of the renminbi, but are freeing up funds by constantly cutting interest rates. Because our own exchange rate itself has a certain countercyclical phenomenon, our RMB may continue to depreciate, and some people even ** RMB depreciation will reach about the limit.

If the renminbi continues to depreciate, funds will "run" outward, and in this wave of renminbi depreciation, some funds will invest abroad.

The renminbi continues to depreciate, leading to a sell-off in capital flight and even depreciating pressure on other emerging market countries, causing a global economic crisis.

I think this capital will definitely run out, if the RMB depreciates, then the flow of funds will go outward, but for the current market, it is still running normally, and the liquidity is relatively orderly.

It should be, so now the state is making more efforts to develop the economy, and has shifted all the centers to the yuan.

There are three reasons for the recent sharp depreciation of the RMB exchange rate: First, since the beginning of this year, the economies of countries around the world have begun to slow down due to the impact of the epidemic. China's economy has also been affected by the epidemic prevention and control, and some cities have been locked down, and GDP growth is expected to decline in the second quarter, so the RMB exchange rate has depreciated.

Second, due to the impact of the epidemic in early 2020, the U.S. economy continued to be sluggish, and in order to get out of the economic crisis, the Federal Reserve printed money to transfer the crisis to the world, which led to a sharp ** in the dollar index. However, as a result of the money printing spree, there was a price increase in the United States. In March, the CPI index in the United States reached:

In order to control inflation, the Federal Reserve announced a 25 base rate hike in the first quarter of this year, and said that there will be no 4-5 rate hikes this year, which has led to the recent US dollar index to continue**. It is precisely because of the continuation of the US dollar that major currencies such as the euro, the yen, and the yuan have depreciated sharply. Third, since the second half of last year, China's central bank has continuously cut the reserve requirement ratio and interest rates, releasing trillions of yuan before and after.

Recently, China's central bank has begun to cut the reserve requirement ratio again. Under the continuous easing of domestic monetary policy, it is reasonable that the RMB exchange rate has been sharply **. Because, no country has ever continued to loosen the monetary policy, and the exchange rate of the national currency will continue to appreciate.

Since the beginning of 2022, the RMB exchange rate has continued to depreciate, of which the RMB exchange rate against the US dollar has depreciated from the beginning of the year to 29 on 25. We note that the depreciation of the RMB against the US dollar is mainly driven by the widening of the long-term interest rate differential between China and the United States, as well as the pessimistic market expectations for domestic economic growth.

Contractionary monetary policy does not lead to currency depreciation. This is because, contrary to expansionary monetary policy, the purpose of contractionary monetary policy is achieved by "reducing the amount of money".

Contractionary monetary policy refers to the central bank's efforts to reduce the level of aggregate demand by reducing the growth of the money supply. That is, when the aggregate demand is greater than the aggregate supply, the economic growth is overheated, and the pressure of inflation is formed, the bank tightens the monetary policy and reduces the amount of money to curb the expansion of aggregate demand. The decrease in currency, the increase in the cost of enterprise use of funds, the decrease in consumption and investment, the decrease in imports, and the inflow of arbitrage capital, all of which cause a decrease in the demand for foreign currency and an increase in the demand for the local currency, so that the domestic currency appreciates.

The open ones will be, but the austerity ones will not.