China's tough attitude to cool appreciation expected exchange rate may May adjustment

China and the US have been piling up on the renminbi: a succession of U.S. government accusations that the renminbi is undervalued, pressuring the renminbi to appreciate, and that some U.S. senators and congressmen are threatening to impose punitive tariffs on the Chinese ...　　This is similar to what happened in 2005! The renminbi was active, controllable and gradual appreciation in 2005. Today, China has the same attitude in the face of still-aggressive "noise": on March 14, Premier Wen Jiabao said the renminbi was not undervalued. Commerce Minister Chen Deming said 21st that China would not be indifferent if the United States imposed trade sanctions on China.　　Central bank governor Zhou Xiaochuan said 22nd that too much demand for the renminbi to appreciate the "noise" does not help the United States. The tough stance has cooled the market's expectations.　　According to the data, the current NDF (Non-deliverable FORWARD, which is often used to measure overseas market expectations of a revaluation of the renminbi) is expected to see a revaluation of the renminbi from two weeks ago to 2.18% from 3% a year later. The renminbi does not cling to a fixed exchange rate for a long time.　　Thankfully, Chinese companies are strengthening their resilience and resilience to appreciation. The renminbi's appreciation is expected to fall slightly March 24, the U.S. House of Representatives fund-raising committee held a hearing on China's exchange rate policy, the day is also China's vice minister of Commerce Zhongshan began visiting the United States.　　According to the Ministry of Commerce website, the visit will be China-US trade balance, trade frictions and other trade-related issues with the United States to communicate, negotiate and negotiate.　　The U.S. Treasury Department will issue a semi-annual report on the currency issue on April 15, which may list China as a currency manipulator. But high pressure does not reach the ideal state of "win and Beggar", says Michael Pettis, a professor at Peking University, which says: "Forcing the renminbi to appreciate is harmful to China's growth, but it may not be conducive to rebalancing in the US." "In fact, the renminbi is not" indifferent ". The renminbi's nominal effective exchange rate rose by 12.3% per cent from July 2005 to the beginning of March this year, the World Bank said in its China Quarterly report, released on March 17. The real effective exchange rate for the renminbi in February was 118.41, up 4.09% from January to a record high, according to the Bank for International Settlements.　　In terms of the renminbi's median against the euro, the renminbi has appreciated by nearly 12% per cent against the euro since then, at a high of 10.3238 per cent last December.　　With the recent hard-line stance of China's top brass, the appreciation of the renminbi in overseas markets is expected to continue to decline, with the NDF market expecting a 2.18% rise in the renminbi in a year's time, compared with a two-week forecast of 3%.　　May for the exchange rate Adjustment window? Fan, a member of the central Bank's Monetary policy Committee, believes that China should continue to implement a "floating" exchange rate regime, especially as uncertainty grows after the economic crisis. Chinese policymakers should considerChina's own international responsibilities and potential foreign "trade protectionism", or even the possibility of "trading war" occurred. But the CICC Research department argues that the possibility of a stronger renminbi is increasing: imports of processing trade by Chinese companies have risen rapidly in recent months, and export growth is expected to remain strong in the coming months; inflation has continued to rise in recent months and is expected to rise further under the influence of the trailing factors　　Reports that a revaluation of the renminbi would not lead to massive unemployment; News of the Greek rating suggests that the possibility of a weaker dollar is rising, increasing the likelihood of a stronger renminbi.　　The next series of events could trigger a revaluation: The U.S. government unveiled a list of currency manipulators, a strategic economic dialogue between the US and China, President Hu Jintao's visit to the United States and G20 meetings. The Wanguo analysis says a compromise solution is for China to allow the renminbi to float before the G20 meeting in June, allowing other G20 countries to believe that the renminbi will appreciate gradually and avoid a passive situation in which other countries at the G20 conference are pressuring China on the renminbi's exchange rate.　　The May should be a more ideal time window for the adjustment of RMB exchange rate policy.　　Cao Tong, deputy governor of Citic Bank, said that the renminbi did not cling to the fixed exchange rate for a long time, but could not float when the financial crisis was over, and could not float when the preparation of the market mechanism was incomplete, and the future float would need to be accompanied by the process of RMB internationalization. China's stronger corporate tolerance is now most concerned that a revaluation of the renminbi hurts jobs and exports.　　The relevant departments are intensively investigating rigorous testing. Societe Generale Securities Research and Development Center calculated data is, if the renminbi began to appreciate in July 2010, a smooth appreciation of 6.6% per year, compared with the value of not appreciating imports and exports are expected to fall by about 0.9% and 0.4% respectively, the trade surplus will increase; In primary products, imports of beverages and tobacco will increase markedly, by 9.5%,　　Non-edible raw materials, mineral fuel lubricants and related raw materials, the import of animal and vegetable fats and waxes will decline, and exports of fossil fuel lubricants and related raw materials, animal and vegetable fats and waxes will be increased, exports of food and activities, non-food materials will decline, and imports and exports of industrial products will be reduced, but the export decline is less than that of imports. China's companies have already been resilient, a study by CICC, a sample of past appreciation of the renminbi, suggests.　　The renminbi has risen 17.5% against the dollar since July 2005, but China's share of the U.S. import market has continued to expand, even after the financial crisis erupted.　　China's exports are not significantly affected by the renminbi's exchange rate, partly because China's exports contain a larger portion of the imports. CICC believes that the recent experience of Chinese apparel and footwear exporters suggests that undue concern is unjustified. China's major competitors in the U.S. market for apparel and footwear exporters come from Mexico. Although the renminbi has appreciated against the Mexican peso since 2000, China's textile industry in the United StatesThe apparel market's share has risen from 21% in 2000 to 48% in 2009. Since the onset of the financial crisis, the renminbi has appreciated 39% against the peso from September 2008 to March 2009, leading to a sharp rise in the cost of Chinese exporters relative to their rivals.　　Chinese exporters have indeed fallen from 46% to 42% in the US apparel and footwear market, but after the yuan/peso exchange rate stabilized, the market share of Chinese exporters rebounded rapidly, even before the yuan's sharp appreciation. "Even if a huge exchange rate shock suddenly occurs, there is only a temporary effect on China's export market share." Once Chinese exporters have adapted to the shocks, they will be able to regain competitiveness.　　CICC analyst Ziqiang thinks. Notably, there are indications that the renminbi is not a foreign institutional investor in Hong Kong's ndf market, but rather a mainland Chinese company, especially a state-owned company in mainland China.　　Zhang Ming, a researcher at the China Academy of Social Sciences, said that the reason these companies shorted the renminbi in the offshore market was to hedge against exchange rate risk, thus better to obtain foreign currency loan spreads. He pointed out that the company's specific operating methods are as follows: As China's domestic yuan lending rate is significantly higher than the U.S. dollar loan rate, some state-owned enterprises to commercial banks to borrow U.S. dollar loans, and then convert the U.S. dollar into renminbi, then used for domestic investment or liquidity business. To hedge against the risk of currency appreciation, state-owned enterprises can go to the Hong Kong NDF market, the sale of a renminbi-dollar forward foreign exchange contracts, the same period as the U.S. dollar loan period. Through the forward forex trading, the state-owned enterprises have been able to successfully lock in the future exchange rate of RMB to U.S. dollars, and thus debt service. In short, the use of the borrowed dollar loan for RMB, while the operating method of selling renminbi forward contract in the offshore renminbi market, can help state-owned enterprises to obtain the spreads between domestic and foreign currency loans on the premise that they do not bear the real exchange rate risk.