Is the outflow of foreign capital taking away the US dollar or the yuan?

At the end of 2014, China's foreign financial liabilities were trillions of US dollars, of which foreign direct investment in China was trillions of US dollars, accounting for 56%, which shows that FDI is the main financial liability**. But given the stock valuation effect of stock FDI and retained profits, the real FDI is much larger than the trillion dollars reported in the balance sheet.

What is the FDI stock valuation effect? Academically, it is called the financial adjustment channel, which refers to the mechanism by which a country's external assets and liabilities change with the fluctuation of exchange rates and assets**. Here, we use two examples to illustrate these two types of stock valuation effects.

The effect of the exchange rate revaluation of the FDI.

Let's say in 2004 a foreign businessman came to China to invest, and he brought 100 US dollars, and RMB is the legal tender in China, so he needs to exchange the 100 US dollars he has on hand for RMB, and the exchange rate at that time was 1 US dollar to 8 yuan, so he got 800 yuan.

Considering the domestic capital controls, the bank will not have much use for the $100, and he will ask the central bank to exchange the $100 on hand for 800 yuan, and the $100 will become a foreign exchange reserve on the asset side of the central bank. At this time, on the balance sheet of foreign finance, the asset side is 100 US dollars in foreign exchange reserves, and the liability side is 800 yuan. <>

It must be US dollars, I invested 6.75 million yuan in your China to build a factory, and then withdrew the investment, if you are at the onshore RMB exchange rate, I will exchange it for 1 million US dollars and leave, and when I go out of the mainland, I will exchange it for 6.95 million yuan according to the offshore RMB exchange rate, do you say I will leave with US dollars or RMB?

I took away Thai baht, and I was happy.

Of course, it's the US dollar, and whoever prints so much money will ask for the yuan.

10,000 percent is dollars, huh? Who is in charge internationally? Squirt every day!

Note: Usually what we call appreciation and depreciation is just exchange rate changes, so let's understand this concept first.

1. If the RMB depreciates, it will be beneficial to China's exports (assuming that the current benchmark exchange rate of the US dollar against the RMB is 1:. Taking the export of a flashlight as an example, assuming that the total cost of making a flashlight in China is RMB (we assume that the intermediate links such as import and export tariffs are all zero yuan), and the Americans will have to spend $1 on their ghost when they want to buy this flashlight, and at this time, we do not make money. When the RMB depreciates, the exchange rate becomes 1:

At 10 o'clock, when the ghost guy spent $1 to buy this flashlight, did we make a lot of money? Because our cost remains the same, but the exchange rate has changed, so do you say you want to do this deal? Suppose you are the president of a Chinese company, and you are definitely willing to make this deal, it is conducive to the outflow of capital, because you make money when you have capital outflow, so it also increases domestic jobs, and the domestic unemployment rate will be reduced.

It is good for domestic stability.

2. When the RMB appreciates, it is still to take China's export of a flashlight as an example (assuming that the current benchmark exchange rate of the US dollar against the RMB is 1:, assuming that the total cost of manufacturing a flashlight in China is RMB (we assume that the intermediate links such as import and export tariffs are zero yuan), at this time, when you buy a flashlight to the United States, you are not profitable, when the RMB appreciates relative to the US dollar, that is, the exchange rate becomes 1:, you lose yuan every time you export a flashlight to the United States, assuming that you are the president of the company that produces the flashlight, Do you still make this deal?

I'm talking here about the impact of RMB rise and depreciation on exports, your question here is indeed unclear in a few words, plus my talent is shallow can not give you a satisfactory answer, if there is any shortcoming, please correct! If you think about it a little more, you'll get the answer.

Because the interest rate in the United States and other countries is basically zero, even if China deposits in the bank, it will make money, and even if it does not deposit in the bank, the renminbi will continue to appreciate and the dollar will continue to depreciate, so even if foreign capital comes to China and buries it in the ground, it will make money.

Actually, such statements are relative.

If the local currency depreciates, the exchange rate of the local currency will fall, and in contrast, the foreign currency appreciates, the foreign currency exchange rate rises, and the capital flows out;

The appreciation of the local currency is conducive to the foreign investment of domestic industries, and the price of imported products is relatively reduced, from this point of view, foreign capital inflow;

The appreciation of the local currency causes the exchange rate of the local currency to rise, and the depreciation of the foreign currency and the increase in the exchange rate of the renminbi to attract foreign enterprises to invest will fall.

At the same time, rising unemployment can also attract foreign companies to hire their own labor, and foreign capital will flow in.

The specific inflow of foreign capital depends on the international economic situation at the time (for example, whether there is an economic crisis), and it is also related to the domestic political and economic situation of the two countries.

This issue is generally discussed in the liberal arts and politics class in the third year of high school.

For example, there is a massive outflow of capital from China.

One possibility is to say that Chinese invest a lot abroad, such as us going to the United States to build factories and invest in them.

We need dollars, so we have to go to the foreign exchange market and exchange the RMB for the dollar, so that in the foreign exchange market, the supply of the local currency increases, and the local currency naturally depreciates.

There is also a way of outflow, for example, foreign companies in China withdraw their capital, for example, the United States closes their branches in China, so he takes the company and sells it to get a bunch of RMB, and then goes to the foreign exchange market to exchange a bunch of dollars and goes home for his own use, which in the same way increases the supply of RMB in the foreign exchange market, which leads to a decrease in the exchange rate of the country.

When there is a large inflow of capital, the same can be done to push the national currency up.

Renminbi** increases"It's so abstract, can it be concrete? Still don't understand. For example:

When they convert their renminbi assets into U.S. dollars and leave China, does that mean that they are swapping renminbi with China's central bank to hold in U.S. dollars? Isn't that a decrease in market liquidity? What is the relationship with the exchange rate**?

Forex trading can be seen as a market, just like a market for selling vegetables.

If we want to invest outside, we have to go to various commercial banks or international banks to exchange RMB for US dollars, and if the RMB of each bank increases, the exchange rate of the RMB will naturally fall, which is equivalent to the increase of the RMB.

To put it simply, the more people sell the same thing, the cheaper it will be. Of course, a large amount of depreciation against the US dollar will depreciate, and there is no need to understand it too complicated.

Foreign exchange is regulated, and inflows and outflows should be basically balanced, not arbitrary.

Generally speaking, it only continues to circulate.

Under the foreign exchange sales system, foreign exchange operates the bank's foreign exchange and obtains RMB, as a bank, it is a special operating enterprise, and the RMB received can be lent.

If the foreign exchange bank ** foreign exchange is more than the foreign exchange purchased, when there is a foreign exchange short, the bank will use RMB to buy foreign exchange in the market in order to balance the position.

If the foreign exchange bank does not buy foreign exchange in the market, but buys foreign exchange from the bank, the bank receives RMB, and the foreign exchange is manifested as a decrease in foreign exchange reserves and a decrease in the amount of RMB accounted for by foreign exchange. **The RMB received by the bank enters the issuance treasury and is withdrawn into circulation.