Although the formulation of “safe and orderly promotion of convertibility of RMB capital projects†has been proposed by the People’s Bank of China and the State Administration of Foreign Exchange to be written into the central “12th Five-Year Plan†proposal, however, in the face of “hot money†In the current situation, the two major regulators have to focus on strict capital project control.
"In the third quarter of this year, China's foreign exchange reserves surged by 107.3 billion US dollars, which means that the base currency of the renminbi has increased by nearly 700 billion yuan. The purpose of raising the deposit reserve ratio twice (the central bank) is to 'hedge', in a certain sense. “At the end of November, the economist and former central bank monetary policy committee member Fan Gang told China Economic Weekly in Shanghai, “If foreign exchange reserves continue to increase rapidly, the central bank can still use the deposit reserve ratio and other currencies. Policy tools hedge liquidity."
Deposit reserve ratio still has room for upward adjustment
At the beginning of November, Zhou Xiaochuan, governor of the People's Bank of China, waved a pool of autumn water on the "pool" theory of hot money.
Since then, the central bank raised the deposit reserve ratio by 0.5 percentage points twice, raising concerns about austerity policies. However, many authoritative sources have told reporters that Zhou Xiaochuan’s “pool†is not mysterious. The deposit reserve ratio and central bank bills are the most important tools of “poolâ€. On the issue of hot money, the central bank cannot adopt more policies. tool.
In November, Ma Delun, deputy governor of the People's Bank of China, clearly stated in an interview with the media in Shanghai that the “pool†that Zhou Xingchang said does not refer to a specific market, but a series of monetary policy combinations. This "policy portfolio" includes adjustments to the deposit reserve ratio, management of foreign exchange settlements, and open market operations.
Previously, the market has been hot on the "pool" point, mainly entangled in the "stock market" or "the property market." Li Xunlei, chief economist of Guotai Junan Securities Research Institute, told China Economic Weekly: "China's interest rate policy is mainly determined by the State Council. Bank credit is mainly handled by the China Banking Regulatory Commission, and the central bank does not have much monetary policy tools for liquidity regulation. ."
At present, the central bank's identification of hot money is mainly judged by whether there is a surge in foreign exchange reserves. In particular, at the end of September this year, the broad money M2 balance reached a record 69.64 trillion yuan, a considerable part of which was released to the market by a historical total of 2.65 trillion US dollars in foreign exchange.
An insider at the Shanghai headquarters of a central bank told China Economic Weekly: "At present, 'hot money' based on three reasons is stirring the central bank's currency regulation, mainly from hot money betting on the appreciation of the renminbi, hot money for arbitrage transactions, and quantification in Europe and America. Hot money flowing to China after the loose policy."
Since the central bank "promoted the reform of the exchange rate mechanism of the RMB exchange rate mechanism to enhance the exchange rate flexibility" on June 19 this year, the RMB has appreciated by about 2.55% against the US dollar, which means that in less than five months, the so-called The "hot money" has gained a risk-free return of 2.55%.
In addition to betting on the hot money of the appreciation of the renminbi, the hot money for arbitrage trading is also eager to move. On October 20, the central bank raised interest rates for the first time in three years, and the one-year benchmark interest rate was adjusted to 2.50%. In contrast, the Fed has maintained the federal funds rate to a historical low of 0 to 0.25%. This means that there is a risk-free arbitrage opportunity between 2.25% and 2.50% between China and the United States.
What is more noteworthy is that in early November, the Fed has decided to launch the second round of quantitative easing policy to inject 600 billion US dollars of liquidity into the market. At present, the US real economy is still not improving, and investment opportunities are lacking. Relatively speaking, China’s economy continues to grow. Objectively, it will make speculative capital have the motive for moving to a country with high economic growth.
If the renminbi continues to appreciate slowly in the next three to five years, this will in turn affect the expectations of overseas hot money. Fan Gang told reporters that in theory, the deposit reserve is interest-bearing, so raising the deposit reserve ratio will not make banks nervous, and China's banking industry can also afford higher reserves. If foreign exchange reserves continue to grow, the central bank still has room to continue to hedge the excess currency caused by the influx of hot money by raising the deposit reserve ratio and issuing central bank bills.
Renminbi appreciation
In fact, the Fed’s second round of quantitative easing has led to another result. When the dollar depreciates against other major currencies, and if the renminbi is in a stable range relative to the US dollar, it means that the renminbi is also a major currency other than the US dollar. In depreciation, this is bound to trigger the pressure on the renminbi to be subject to greater international public opinion.
Then, how likely is this round of RMB appreciation cycle? Li Xunlei told China Economic Weekly: "This year, the appreciation of the renminbi against the US dollar will reach 3%, and next year it may reach 5%, which will have a significant impact on export manufacturing."
In response to the issue of the appreciation of the renminbi after the central bank restarted the exchange rate reform this year, Fan Gang said at a meeting in Shanghai that the appreciation of the renminbi from 2005 to 2008 was a good reference, with an average of more than 5% a year. He believes that in the last round of the RMB appreciation cycle, there has not been a big wave of action, and the economy has grown steadily, and it has also avoided the plunge after the subsequent crisis.
Li Yang, vice president of the Chinese Academy of Social Sciences, told reporters: "This round of domestic price increases is not caused by the demand side. External factors, especially international commodity prices, have a great impact on the domestic market. Therefore, the appreciation of the renminbi to a certain extent. Can suppress the inflation of input."
However, some bank industry insiders told reporters that if the use of central bank bills (open market operations) and reserves to recover liquidity can only consider the total amount but can not control the structure, which may lead to the lack of funds in the real economy sector that needs funds, and The various asset markets that “hot money†is keen on continue to generate bubbles, which makes the “pool theory†of the central bank backfire.
According to the reporter, in order to cope with the influx of hot money into the mainland, some scholars have suggested that the central bank and the foreign exchange administration should adjust their existing foreign exchange management policies.
Foreign exchange control
The State Administration of Foreign Exchange issued the "Notice on Strengthening the Management of Foreign Exchange Business", which stated the determination of "preventing financial risks brought about by cross-border capital flows" in response to the "hot money" issue.
The "Notice" proposed to strengthen the comprehensive position management of bank settlement and sale of foreign exchange, strict management of export settlement and settlement of exchanges, strict financial institutions' short-term external debt indicators and external guarantee balance management, strengthen the management of foreign investors' investment by foreign investors, and strengthen overseas The listed funds will be returned to the authenticity review of foreign exchange settlement, and the six policies and measures for the establishment of overseas special purpose companies for domestic institutions and individuals will be strengthened.
Li Xunlei told reporters that the above measures are basically a containment policy, that is, through strict capital project control, this is not only inconsistent with the safe and orderly promotion of the convertibility of RMB capital projects in the 12th Five-Year Plan, but also with Zhou Xiaochuan. The tone of the pool theory is very different.
At the end of November, Xia Bin, a member of the central bank's monetary policy committee, came up with the concept of “Tobin taxâ€, arguing that China can consider taxing foreign exchange transactions in the spot market and strictly restrict foreign investment in commercial real estate as a way to curb short-term One of the initiatives for hot money inflows.
An insider at the Shanghai headquarters of a central bank told China Economic Weekly: "There are some studies in China that show that the use of containment methods to prevent large-scale influx of hot money has a certain short-term effect, but in the long run, 'hot money' It will flow into and out of every possible gap in the foreign exchange control, and it is better to arrange these 'hot money' flows than to contain them."
"Now I feel that the way of implementing capital control and foreign exchange control in the past year has indeed been adjusted. In the past, how much foreign exchange came in was not a matter of preparation, and the case of capital outflows was strictly regulated. From the current policy, foreign exchange The regulation should shift to 'strict entry and exit'," Fan Gang told China Economic Weekly. "We should encourage private private deposits and exchanges to encourage private investment in overseas investment, including overseas home ownership."
"In the third quarter of this year, China's foreign exchange reserves surged by 107.3 billion US dollars, which means that the base currency of the renminbi has increased by nearly 700 billion yuan. The purpose of raising the deposit reserve ratio twice (the central bank) is to 'hedge', in a certain sense. “At the end of November, the economist and former central bank monetary policy committee member Fan Gang told China Economic Weekly in Shanghai, “If foreign exchange reserves continue to increase rapidly, the central bank can still use the deposit reserve ratio and other currencies. Policy tools hedge liquidity."
Deposit reserve ratio still has room for upward adjustment
At the beginning of November, Zhou Xiaochuan, governor of the People's Bank of China, waved a pool of autumn water on the "pool" theory of hot money.
Since then, the central bank raised the deposit reserve ratio by 0.5 percentage points twice, raising concerns about austerity policies. However, many authoritative sources have told reporters that Zhou Xiaochuan’s “pool†is not mysterious. The deposit reserve ratio and central bank bills are the most important tools of “poolâ€. On the issue of hot money, the central bank cannot adopt more policies. tool.
In November, Ma Delun, deputy governor of the People's Bank of China, clearly stated in an interview with the media in Shanghai that the “pool†that Zhou Xingchang said does not refer to a specific market, but a series of monetary policy combinations. This "policy portfolio" includes adjustments to the deposit reserve ratio, management of foreign exchange settlements, and open market operations.
Previously, the market has been hot on the "pool" point, mainly entangled in the "stock market" or "the property market." Li Xunlei, chief economist of Guotai Junan Securities Research Institute, told China Economic Weekly: "China's interest rate policy is mainly determined by the State Council. Bank credit is mainly handled by the China Banking Regulatory Commission, and the central bank does not have much monetary policy tools for liquidity regulation. ."
At present, the central bank's identification of hot money is mainly judged by whether there is a surge in foreign exchange reserves. In particular, at the end of September this year, the broad money M2 balance reached a record 69.64 trillion yuan, a considerable part of which was released to the market by a historical total of 2.65 trillion US dollars in foreign exchange.
An insider at the Shanghai headquarters of a central bank told China Economic Weekly: "At present, 'hot money' based on three reasons is stirring the central bank's currency regulation, mainly from hot money betting on the appreciation of the renminbi, hot money for arbitrage transactions, and quantification in Europe and America. Hot money flowing to China after the loose policy."
Since the central bank "promoted the reform of the exchange rate mechanism of the RMB exchange rate mechanism to enhance the exchange rate flexibility" on June 19 this year, the RMB has appreciated by about 2.55% against the US dollar, which means that in less than five months, the so-called The "hot money" has gained a risk-free return of 2.55%.
In addition to betting on the hot money of the appreciation of the renminbi, the hot money for arbitrage trading is also eager to move. On October 20, the central bank raised interest rates for the first time in three years, and the one-year benchmark interest rate was adjusted to 2.50%. In contrast, the Fed has maintained the federal funds rate to a historical low of 0 to 0.25%. This means that there is a risk-free arbitrage opportunity between 2.25% and 2.50% between China and the United States.
What is more noteworthy is that in early November, the Fed has decided to launch the second round of quantitative easing policy to inject 600 billion US dollars of liquidity into the market. At present, the US real economy is still not improving, and investment opportunities are lacking. Relatively speaking, China’s economy continues to grow. Objectively, it will make speculative capital have the motive for moving to a country with high economic growth.
If the renminbi continues to appreciate slowly in the next three to five years, this will in turn affect the expectations of overseas hot money. Fan Gang told reporters that in theory, the deposit reserve is interest-bearing, so raising the deposit reserve ratio will not make banks nervous, and China's banking industry can also afford higher reserves. If foreign exchange reserves continue to grow, the central bank still has room to continue to hedge the excess currency caused by the influx of hot money by raising the deposit reserve ratio and issuing central bank bills.
Renminbi appreciation
In fact, the Fed’s second round of quantitative easing has led to another result. When the dollar depreciates against other major currencies, and if the renminbi is in a stable range relative to the US dollar, it means that the renminbi is also a major currency other than the US dollar. In depreciation, this is bound to trigger the pressure on the renminbi to be subject to greater international public opinion.
Then, how likely is this round of RMB appreciation cycle? Li Xunlei told China Economic Weekly: "This year, the appreciation of the renminbi against the US dollar will reach 3%, and next year it may reach 5%, which will have a significant impact on export manufacturing."
In response to the issue of the appreciation of the renminbi after the central bank restarted the exchange rate reform this year, Fan Gang said at a meeting in Shanghai that the appreciation of the renminbi from 2005 to 2008 was a good reference, with an average of more than 5% a year. He believes that in the last round of the RMB appreciation cycle, there has not been a big wave of action, and the economy has grown steadily, and it has also avoided the plunge after the subsequent crisis.
Li Yang, vice president of the Chinese Academy of Social Sciences, told reporters: "This round of domestic price increases is not caused by the demand side. External factors, especially international commodity prices, have a great impact on the domestic market. Therefore, the appreciation of the renminbi to a certain extent. Can suppress the inflation of input."
However, some bank industry insiders told reporters that if the use of central bank bills (open market operations) and reserves to recover liquidity can only consider the total amount but can not control the structure, which may lead to the lack of funds in the real economy sector that needs funds, and The various asset markets that “hot money†is keen on continue to generate bubbles, which makes the “pool theory†of the central bank backfire.
According to the reporter, in order to cope with the influx of hot money into the mainland, some scholars have suggested that the central bank and the foreign exchange administration should adjust their existing foreign exchange management policies.
Foreign exchange control
The State Administration of Foreign Exchange issued the "Notice on Strengthening the Management of Foreign Exchange Business", which stated the determination of "preventing financial risks brought about by cross-border capital flows" in response to the "hot money" issue.
The "Notice" proposed to strengthen the comprehensive position management of bank settlement and sale of foreign exchange, strict management of export settlement and settlement of exchanges, strict financial institutions' short-term external debt indicators and external guarantee balance management, strengthen the management of foreign investors' investment by foreign investors, and strengthen overseas The listed funds will be returned to the authenticity review of foreign exchange settlement, and the six policies and measures for the establishment of overseas special purpose companies for domestic institutions and individuals will be strengthened.
Li Xunlei told reporters that the above measures are basically a containment policy, that is, through strict capital project control, this is not only inconsistent with the safe and orderly promotion of the convertibility of RMB capital projects in the 12th Five-Year Plan, but also with Zhou Xiaochuan. The tone of the pool theory is very different.
At the end of November, Xia Bin, a member of the central bank's monetary policy committee, came up with the concept of “Tobin taxâ€, arguing that China can consider taxing foreign exchange transactions in the spot market and strictly restrict foreign investment in commercial real estate as a way to curb short-term One of the initiatives for hot money inflows.
An insider at the Shanghai headquarters of a central bank told China Economic Weekly: "There are some studies in China that show that the use of containment methods to prevent large-scale influx of hot money has a certain short-term effect, but in the long run, 'hot money' It will flow into and out of every possible gap in the foreign exchange control, and it is better to arrange these 'hot money' flows than to contain them."
"Now I feel that the way of implementing capital control and foreign exchange control in the past year has indeed been adjusted. In the past, how much foreign exchange came in was not a matter of preparation, and the case of capital outflows was strictly regulated. From the current policy, foreign exchange The regulation should shift to 'strict entry and exit'," Fan Gang told China Economic Weekly. "We should encourage private private deposits and exchanges to encourage private investment in overseas investment, including overseas home ownership."
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