From the end of 2002, a few countries, such as Japan, began to spread "China's theory of exporting deflation" in the international community. In 2003, this debate further escalated into a call for RMB appreciation. Around 2005, Japan, the United States, the European Union and other major developed countries demanded that China change its exchange rate system or force the RMB to appreciate due to domestic economic needs or domestic political pressure. Since July 2, 2005, China began to implement a managed floating exchange rate system based on market supply and demand and with reference to a basket of currencies. According to the reasonable and balanced exchange rate, the RMB has appreciated by 2% against the US dollar to 1 USD to 8.1RMB. The daily fluctuation range of the US dollar is limited to 3‰ of the closing price of the previous trading day, and the non-US dollar fluctuates within 1.5%. However, the adjustment of RMB exchange rate policy is not under the pressure of the above countries, but out of foresight and active adjustment of the future development path. The reason why we chose this opportunity to reform the exchange rate mechanism is that China's sustained high-speed economic growth, higher degree of opening to the outside world, and stronger expectation of RMB appreciation have led to a rapid increase in foreign exchange reserves and a continuous increase in foreign exchange holdings. The central bank has to issue bills on a large scale to hedge, which has increased the cost of macro-control and made the cost of the exchange rate system pegged to the US dollar rise. The latest data show that economic growth, investment in fixed assets, import and export have maintained a high-speed trend, and the price increase has continued to fall, providing a stable economic environment for the reform of the exchange rate mechanism. The sustained rebound of the US dollar and the weakening of the euro and the Japanese yen have also created a good opportunity to change the exchange rate system pegged to the US dollar.
II. Costs and benefits of RMB exchange rate system reform
(A) Thinking about the cost of RMB exchange rate system reform
Due to the appreciation of RMB after the reform, the costs are as follows: first, it may reduce external demand and exports, affecting the realization of short-term economic growth goals; Second, it may increase the cost of foreign direct investment and is not conducive to attracting foreign direct investment; Third, it may cause short-term unemployment caused by structural adjustment.
But considering the actual situation in China, unlike the cost, even if there is, its impact is very limited or even vague.
1. The impact of RMB appreciation on exports may not be obvious. Hu Zuliu of Goldman Sachs (2003) pointed out that the export elasticity of RMB exchange rate is very small, and exchange rate adjustment will not bring much change to exports. This is related to China's unique trade structure. At present, processing and assembling trade and processing trade with materials account for 55% of China's exports. At the same time, import processing and assembly trade, import processing trade and imported foreign machinery and equipment account for 60% of all imports, and import processing and assembly trade only earns a fixed labor fee, which has nothing to do with exchange rate changes. There is little difference in import processing trade. At the same time, the share of some export products of China in the international market is quite high, and the cost is far from that of its competitors. 2% appreciation of RMB will increase export income, not decrease it.
2. Since the mid-1990s, new changes have taken place in the motivation of FDI inflow. More FDI comes from multinational companies in developed countries in Europe and America, and the purpose of investing in China is more inclined to target China's domestic market, unlike those small and medium-sized enterprises in Southeast Asia who use China as an export processing platform (UNCTAD, 2002). Although the appreciation of exchange rate increases the investment cost of new FDI investment, it also increases the local sales income of foreign enterprises denominated in US dollars. On the one hand, it may hinder some FDI inflows that take advantage of China's labor and land costs, but it may also encourage some FDI inflows that try to enter the China market. Therefore, RMB appreciation of 2% will not have much impact on FDI.
3. According to the calculation in the Trade and Development Report of the United Nations Conference on Trade and Development in 2002, among 17 important sample countries, China has the lowest unit labor wage, and the wages of the sample countries are 2.5-47.8 times that of China respectively. Even considering the unit labor productivity, the cost of 17 sample country is higher than that of China. Therefore, a 2% appreciation of RMB will not affect employment. To take a step back, even if the employment in the export sector is affected to some extent, in the long run, considering that the employment opportunities provided by the manufacturing industry have hardly changed, the employment opportunities provided by the service industry have greatly improved, and the increase in employment opportunities in the service industry can completely make up for the decrease in employment opportunities in the export sector.
4. The disadvantage of using "reference" instead of "peg" to the currency basket in the central bank's exchange rate reform is that the exchange rate is more flexible, and the camera choice of the central bank's exchange rate policy is more easily influenced by other government functional departments. Therefore, the central bank must maintain a delicate balance between exercising flexible discretion and maintaining the dynamic consistency of exchange rate policy.
(2) Investigation on the income from the reform of RMB exchange rate system
The benefits of exchange rate reform are manifold. First, adjusting the exchange rate to a level consistent with the actual equilibrium exchange rate movement trend also means getting the most efficient exchange rate price in the allocation of international economic resources. It is conducive to the balanced development of various industries and to long-term resource allocation and economic growth. Second, the active adjustment of exchange rate puts the initiative of exchange rate adjustment in the hands of the monetary authorities, and at the same time leaves some room for policy adjustment for the monetary authorities, which is conducive to macroeconomic stability. Third, exchange rate reform has enhanced the purchasing power of RMB and helped to improve people's living and welfare. At the same time, the income brought by exchange rate appreciation is more beneficial to farmers and employees in the tertiary industry in cities. Fourthly, the exchange rate reform is tantamount to announcing to the market that the goal of China monetary authorities is to balance the international payments, not the narrow trade surplus.
Judging from the current reality in China, the benefits of RMB exchange rate reform are still very obvious. The new exchange rate system has mainly affected China in the following aspects:
Although it is difficult to balance the balance of payments, it greatly reduces the frequency of central bank intervention.
After the exchange rate reform, the balance of payments is still an important basis for adjusting the RMB exchange rate. Since 2005, the average monthly foreign exchange reserves of China have increased at a rate of about 654.38+0.5 billion US dollars, reaching 20 billion US dollars in the last three months, and the foreign exchange reserves have been increasing substantially. But we can't simply think that the current reserve growth is hot money except foreign exchange surplus and foreign direct investment. Taking the balance of payments in 2004 as an example, the annual surplus was $206.6 billion, of which the trade in goods and direct investment were $59 billion and $53,654.38+0 billion respectively. It cannot be understood that all the remaining balance of payments surpluses can be summarized as so-called "hot money", and most of the remaining differences can be explained by current transfer, securities investment and trade credit.
China's balance of payments pays more attention to the overall balance of trade in goods and services. From 2000 to 2004, these two items were basically stable. The trade surplus of goods is about $20 billion to $30 billion, and the trade deficit of services is about 1000 billion. Together, these two items account for about 2% of China's GDP and 2% of its total import and export. From the first half of this year, China's total import and export value reached US$ 645.03 billion, making the trade surplus reach US$ 39.6 billion, exceeding the level of last year. It is estimated that the growth rate of China's foreign trade export and import will be about 22% and 18% respectively in the second half of the year, and a surplus of over 30 billion US dollars will be achieved. Therefore, only relying on exchange rate reform can not quickly and significantly restore the balance of payments to the basic balance track. Therefore, in the short term, it will not change the central bank's intervention in the foreign exchange market, but only reduce the frequency of central bank intervention in the foreign exchange market. The central bank only intervenes in the foreign exchange market when necessary to prevent excessive exchange rate fluctuations, and it is not necessary to intervene every day. At this time, the foreign exchange market can truly reflect the change of exchange rate.
Set off a wave of financial innovation
After the reform of exchange rate mechanism, the fluctuation of RMB exchange rate will be a normal state, so corresponding derivatives are needed to avoid and lock in risks, which in itself means higher requirements for accelerating the development of foreign exchange market and innovation of related financial products. For example, on August 4, the central bank pointed out in its monetary policy implementation report for the first half of the year that it would accelerate the development of the foreign exchange market and various foreign exchange derivatives in the second half of the year, start inter-bank forward foreign exchange transactions as soon as possible, and launch RMB-to-foreign currency swaps and other products. On August 9, the central bank decided to expand the forward foreign exchange settlement and sale business of designated foreign exchange banks and start the RMB and foreign currency swap business. The introduction of these derivatives will help stabilize the current exchange rate, form the expectation of RMB's next fluctuation through market transactions, and give the market a guide, so as to better digest the exchange rate risk of RMB.
Improve the ability of banks to manage exchange rate risks.
"Managed floating" tests the difficulty of bank risk management. For this exchange reform, it is not enough for banks and enterprises to pay too much attention to the fluctuation range of the spot exchange rate of RMB against the US dollar and non-US dollar.
As far as banks are concerned, commercial banks must have different pricing power for small and large amounts of cash in different currencies, foreign exchange supply and demand of residents, enterprises and peers, spot varieties such as RMB against the US dollar with good liquidity and other non-US dollar varieties with relatively weak liquidity. This differential pricing is much more flexible than the fluctuation range set by the central bank for the foreign exchange trading market. If commercial banks ignore the risk pricing challenge brought by the exchange rate reform, the credit risk of trade financing, the exchange rate risk of the net position of foreign exchange settlement and sale, and the risk of foreign exchange financing on behalf of customers will face more uncertainties. Therefore, the reform of RMB exchange rate system has brought challenges to the risk management ability of commercial banks, which is helpful to improve the risk management ability of commercial banks.
Thirdly, it is impossible for China to quickly transition to a fully floating exchange rate system.
The advantages of RMB's return to a managed floating system are obvious, but judging from the actual situation in China, it is impossible for China to quickly transition to a completely floating exchange rate, because:
(1) China's financial market, especially the foreign exchange market, is still very underdeveloped. In the case of imperfect and underdeveloped financial market system, if the exchange rate fluctuates greatly, the financial market can not respond sensitively and adjust spontaneously as a whole, which may cause serious imbalance and disorder in local markets; Economic entities can't properly adjust their asset positions, resulting in serious losses. At present, the formal foreign exchange market in China is limited to a few banks, and enterprises and individuals cannot directly enter it. At present, there is no forward foreign exchange market, and the transactions in the forward foreign exchange market have not been fully carried out. In this case, if the exchange rate fluctuates greatly, it will be difficult for microeconomic entities, especially import and export enterprises, to avoid exchange rate risks through foreign exchange transactions.
(2) RMB is not an international currency. For non-international monetary countries, the process of exchange rate system reform is actually a process of integrating with the international financial system and rules. In this process, based on the inertia of relying on the government, enterprises not only consider seeking benefits and development from market competition, but also pay special attention to seeking benefits from the government and its policies. They have high expectations for government policies. Therefore, once the government makes mistakes in decision-making, it is likely to cause huge losses to enterprises and countries, lead to strong opposition, and the reform of exchange rate system may be aborted, and may cause huge economic turmoil.
(3) China's financial system is still relatively fragile. At present, China's financial structure is still dominated by indirect bank financing, while the non-performing assets ratio of banks, especially state-owned banks, is still quite high. In this case, if the exchange rate is completely liberalized, devaluation is expected to cause a large number of RMB deposits to be withdrawn, while appreciation is expected to cause a large number of foreign currency deposits to be withdrawn, which may lead to a bank run and trigger a currency crisis.
(4) China's market-oriented financial supervision system is not perfect. For a long time, China has been implementing strict foreign exchange control, accustomed to controlling the exchange rate in a narrow foreign exchange market, and lacks a set of systems, rules, means and experience of foreign exchange management and market intervention under open market conditions. In this case, if the exchange rate is suddenly and completely liberalized, there will be problems such as market chaos and exchange rate out of control.
(5) The contradiction of currency mismatch in China is prominent. According to the definition of Professor Goldstein (2005), the so-called currency mismatch is: "When the net equity or net income (or both) is very sensitive to exchange rate changes, the so-called' currency mismatch' appears. From the perspective of stocks, currency mismatch refers to the sensitivity of the balance sheet to exchange rate changes; From the perspective of flow, currency mismatch refers to the sensitivity of income statement to exchange rate changes. The higher the sensitivity of net value (net income) to exchange rate changes, the more serious the currency mismatch. "
The formation of currency mismatch has external and internal causes. In other words, the currency mismatch in developing countries is a natural product of the international monetary pattern. After the collapse of the Bretton Woods system, the role of "key currency" in the international monetary system was mainly assumed by the US dollar and the euro, which actually "marginalized" the currencies of all other countries except Europe and America. Because the domestic currency can not be used in international economic exchanges, the assets/liabilities, income/expenditure of developing countries show the coexistence of multiple currencies, and currency mismatch has become the norm. Internally, the backward capital market and the long-term fixed exchange rate have aggravated the currency mismatch in developing countries. With the development of the capital market lagging behind, enterprises lacking effective sources of funds have to go overseas to raise funds through various channels, and the "surplus" savings that are difficult to find effective investment opportunities have to flow to the international capital market in large quantities. Because the international capital market does not accept the local currency of developing countries, the transnational capital flow caused by the lagging development of the capital market further aggravates the currency mismatch of developing countries. Judging from the formation mechanism, it is difficult for China to avoid currency mismatch. On the one hand, RMB is far from becoming an international currency, so the characteristics of "original sin" and "high savings dilemma" will not be eliminated for a long time; On the other hand, the inefficiency of China's capital market is obvious to all, which undoubtedly aggravates the currency mismatch; In addition, the long-term implementation of the fixed exchange rate system pegged to the US dollar makes China's microeconomic entities insensitive to currency mismatch. The result of simple calculation shows that China is one of the countries with serious currency mismatch. By the end of 2004, foreign currency assets held by China residents accounted for 27% of M2. If we consider the fact that China's foreign debt balance has reached $228.596 billion in 2004, the contradiction of currency mismatch is obviously more prominent. The huge currency mismatch makes it impossible for China to quickly transition to a fully floating exchange rate.
Four. Supporting measures to improve China's exchange rate mechanism
With the development of China's financial opening, China needs to reform and improve the RMB exchange rate stability mechanism. How to avoid currency mismatch risk out of control and exchange rate fluctuation in the process of implementing a managed floating exchange rate system requires corresponding economic policies to ensure it. We should also take measures from various aspects to gradually promote reform and realize a truly managed floating exchange rate system.
First, maintain a high level of foreign exchange reserves and strengthen the management and use of foreign exchange reserves. A higher level of foreign exchange reserves helps to control the risk of currency mismatch. First of all, a high level of foreign exchange reserves is an important guarantee for managing the floating exchange rate system to resist the impact of international speculative capital. Since 1990s, the threat of currency crisis has prompted developing countries to rapidly increase their international reserves. From the perspective of "maintaining confidence", the higher the level of international reserves, the greater the "threat" effect of "citing but not issuing", and the less dare international speculative capital make mistakes in its own exchange rate system. Secondly, a higher level of international reserves can ensure the government's ability to take over the currency mismatch in the private sector and avoid the government's loss of the overall impact of the currency mismatch on microeconomic entities.
Second, actively participate in and build regional monetary cooperation. The deepening economic and trade ties in Asia have laid a solid foundation for regional financial cooperation, and the huge foreign exchange reserves have enhanced the self-circulation of Asian funds and their ability to resist external shocks. As a big developing country in Asia, China should actively participate in and construct Asian monetary cooperation. (1) Further open the financial industry with a positive attitude and support the development of intra-regional trade. (2) Give full play to Hong Kong's two new advantages in international finance, actively promote the construction of Shanghai financial center, and make its advantages and functions complement those of international financial centers, so as to further play the comprehensive functions of international financial centers. (3) Play a leading role in East Asian monetary cooperation and enhance the international status of RMB. (4) Actively strengthen cooperation among central banks of Asian countries and regions. (5) Actively promote the reform of domestic financial system, establish a healthy financial system, exchange experiences and lessons with Asian countries in reducing non-performing loans and disposing of high-risk financial institutions in a timely manner, * * * establish an early warning mechanism for Asian financial risks, strengthen cooperation among financial regulatory authorities in various countries and regions, and * * * prevent and resolve financial risks.
Third, by providing a stable macroeconomic environment and a sound micro-system, we can promote the development of the capital market. One of the reasons for currency mismatch is the underdeveloped capital market in developing countries. From this perspective, the development of capital market should play an important role in the strategy of managing currency mismatch and dedication. Fundamentally speaking, a stable economic environment is the prerequisite for the development of the capital market. In terms of monetary policy, China should gradually transition to the inflation targeting system, instead of simply changing from controlling the money supply to regulating interest rates. In terms of fiscal policy, it is absolutely necessary to stabilize the public and enterprises through a prudent fiscal policy. For the development of the capital market, it is not enough to have a stable macro-economic environment, but it is equally important to strengthen the construction at the micro-institutional level. At the same time, there are many factors that hinder the development of capital market in China's micro-system, which need to be improved through reform.
Fourth, strengthen the management of cross-border capital flows. After the exchange rate reform, international capital flow management is facing new pressures: short-term capital flows are more frequent; The importance of balanced management of capital flow is more prominent; The effectiveness of foreign exchange management is difficult to guarantee. In view of the imbalance of international capital flows, the measures to be taken at this stage are to establish a new balanced management mechanism that can alternately cope with the pressures of "appreciation" and "depreciation": rationally adjust the scale of foreign exchange reserves; Use changes in interest rates and exchange rates to influence the macro-economy; Flexible use of policies, reflecting both inflow and outflow in the system design, and making choices according to the actual situation, effectively coping with the expected conversion of "appreciation" and "depreciation". At the same time, on the one hand, strengthening the management of cross-border capital flows is an important measure to strengthen the management of foreign debts and foreign exchange reserves and resist the impact of international speculative capital on exchange rates; On the other hand, through targeted arrangements, we can limit the "excessive" international lending and "excessive" international investment caused by the lagging development of the domestic capital market.
Fifth, strengthen the collocation of macro policies. Since the reform and opening up, China's macroeconomic policy has basically highlighted fiscal policy and monetary policy, while exchange rate policy has hardly existed. With the evolution of RMB exchange rate system from middle road to floating exchange rate system, exchange rate policy will also play an increasingly prominent role in regulating economy. Therefore, we should strengthen the coordination and reasonable collocation of fiscal policy, monetary policy and exchange rate policy. (1) Make it clear that exchange rate policy is an important part of monetary policy, and bring exchange rate into the framework of monetary policy through a series of institutional arrangements, so that exchange rate policy can play its role of market regulation. (2) Use innovative policy tools. However, when monetary policy and exchange rate policy are not coordinated, especially when facing serious difficulties, innovative policy tools can be taken in time to get rid of the predicament. (3) Properly handle the relationship between exchange rate stability and exchange rate imbalance. We will steadily deepen structural reforms and achieve good convergence of various markets.