RMB " Diving " Or " Really Down " How Big Is The Investment Risk?

Although moderate depreciation will help to increase the flexibility of RMB exchange rate and enhance export competitiveness, it will also help to ease the pressure on capital account liberalization in the future. But excessive depreciation should be avoided. Excessive depreciation will lead to human panic and increase.

It is expected that the central bank will be forced to raise interest rates passively, thereby triggering financial risks such as asset bubble bursts.

Therefore, measures should be taken to tighten money, strengthen foreign exchange control and stabilize foreign exchange reserves in the future.

The first devaluation of the yuan occurred in January 1994, when the dual exchange rate system was merged, and the official exchange rate and the RMB swap price were merged. The exchange rate of RMB against the US dollar fell from 5.8:1 to 33% to 8.7.

After that, with the inflow of foreign capital and the continuous export surplus, the RMB exchange rate rebounded.

From 1997 to 2005, the central bank adopted a fixed exchange rate system pegged to the US dollar and maintained 8.28:1 for a period of time.

In July 2005, China began to implement the floating exchange rate system. On the day of policy promulgation, the RMB exchange rate rose to 2.1% against the US dollar. Since then, the RMB exchange rate has no longer pegged to the single dollar, but has a "managed float" for the exchange rate of a basket of currencies, with a daily amplitude of + 0.3%.

After the subprime crisis in the United States, the renminbi was pegged to the US dollar and the exchange rate remained at 6.83.

In 2010, the "management float" was restored.

In 2014, the RMB ended its appreciation process of nearly 9 years, and began to depreciate against the US dollar. From the highest point, the depreciation rate has reached 14%, and the duration is also close to three years.

Judging from the changes in China's foreign exchange reserves, China's foreign exchange reserves peaked in June 2014, lagging behind the top of the appreciation of the exchange rate (6.04) for 5 months, and began to decline gradually after reaching 3 trillion and 990 billion dollars.

In October 2016, the scale of China's foreign exchange reserves was 3 trillion and 120 billion, the highest point decreased by US $876 billion 800 million. Therefore, it can be generally considered that the RMB has entered the cycle of depreciation.

Like a bogus proposition, does a pocket need to be entangled in "diving" or "falling"? The difference between the two is evident after the Federal Reserve raised interest rates in December: if the "diving" occurs, the renminbi will rebound after the Fed's interest rate boots arrive, and the two-way fluctuation will take place.

Watching the renminbi's "12 consecutive down" against the US dollar, it is a "stagger" which has dropped from 6.7 to 6.9, and the time span is about one and a half months.

The market even sighs that the renminbi is so "emotional and capricious": "double ten" breaks 6.7, "double eleven" breaks 6.8, and Western Thanksgiving breaks 6.9.

Again, three years ago, the market was exclaiming that the central parity of RMB against the US dollar "broke 6". In November 24th, three years later, the central parity price of RMB was 6.9085, the onshore RMB 6.9180 and the offshore RMB 6.9488.

In the case of poor macroeconomic data, this is like a mystery, but perhaps the next big chess game.

It may be a difficult choice. The central authorities are pushing the reform of the RMB exchange rate regime to try to complete the reform of the RMB exchange rate formation mechanism and let the market have the final say.

Some people say that this may be the right thing to do at the wrong time; also, the view is that when the national pportation comes, it will be the time to improve the machine.

Well, rather than exchange reform, it is better for the central Mama to take precautions against the potential local financial crisis.

The signal has been issued: Historically, the breaking up of the US dollar index is always associated with the outbreak of the crisis, such as "Southeast Asian finance, European debt" and other crises, including a large scale economic crisis in the low interest rate era.

Right now,

Under pressure, in November 22nd, Malaysia's ringgit fell against the US dollar to its lowest level since 1998. In November 25th, the central parity of RMB against the US dollar was 6.9168, a new low in June 2008.

Even when the financial crisis broke out in 2008, the central parity of RMB against the US dollar was "bite" between 6.82-6.83, and the corresponding foreign exchange reserve was 1 trillion and 900 billion US dollars at that time.

The so-called "national pportation" or "TPP" ("cross the Atlantic trade and investment partnership") "abdicate", China's "one belt and one road" superposition.

The Obama Administration recently announced the abandonment of a parliamentary vote to pass the TPP, which could mean the actual death of TPP.

Trump's election has polarized the developed and emerging markets.

The other end of currency depreciation and capital outflow in emerging economies is the 17 largest new four index of the United States (S & P 500, Dow Jones industrial average, NASDAQ Composite Index and Russell 2000).

In fact, the world history has entered a new era of non order after the announcement of the November 9th election results. This era of breaking the old order is full of challenges and opportunities, but it is also dangerous and unpredictable.

At this special time window, how can the central Mama "turn a blind eye to"? "Stable exchange rate" is almost the macro background of the formation of inertial thinking for many years. No one believes that Ma will tolerate the rapid devaluation of the RMB.

The official has also been voicing: in the medium to long term, the renminbi has no basis for depreciation.

The fact is that there is also a misery: the foreign exchange reserves of the Chinese family are shrinking, compared with the peak of 3 trillion and 990 billion US dollars (June 2014), which has been slimmed down to the current US $3 trillion and 100 billion.

When your family is thin, you have to plan your life.

In addition, in the current time dimension, the choice of reserve assets and insurance assets may be more likely to protect the exchange rate than the exchange rate, or, at present, the external reserve balance will touch the parties to set the security interval.

After all, the external reserve is the guarantee of exchange rate. Without external reserves, it is difficult to resist external exchange rate shocks.

Moreover, the central Mama needs to do the devaluation stress test, and it seems to no longer keep the key points.

Or because the capital market is temporarily safe, inflation expectations are rising.

Why not release the pressure on RMB depreciation at a special time point (Fed rate hike and Trump's assumption of office)? The latest federal funds interest rate market data show that in December, the probability of the Fed raising 25 basis points was 100%.

In fact, the negative effect of the depreciation of RMB has been reflected: the global bank financial Communications Association (SWIFT) 23 day data show that in October, the RMB's position in the global payment currency fell to sixth again.

To some extent, exchange rate fluctuations and downward pressure on the economy have constrained the enthusiasm of foreign investors to use or hold Renminbi.

This also proves that in the initial stage, when a country's currency is in the appreciation channel, it is more conducive to the internationalization of currency.

However, the good side is that the national movement is suddenly emerging. The promotion of "one belt and one road" is undoubtedly favorable for the internationalization of RMB.

If the renminbi really hits 7, it is not terrible.

What's wrong with the new exchange rate mechanism is how to cope with the big test in the extreme market environment, the negative effect of "devaluation expectation + expectation realization", and the high pressure control policy under urgent need, including the amplification of panic.

At that time, the renminbi's "diving" may become "real fall".