Hu Xiaolian wrote two Thursday: Exchange and factor price adjustment can be parallel

Enhancing the flexibility of RMB exchange rate can promote factor price adjustment reporter Zhang Mo intern journalist Sarina Beijing, 28th the central bank's website, published in the central bank's deputy governor Hu Xiaolian, said that further increases in the exchange rate will help create a stable and low inflation environment for factor price reforms, without hampering the broad production factor price adjustment, and can promote the general factor of production price adjustment. "Exchange Rate mechanism reform and production factor price adjustment will not be mutually constrained and mutually exclusive, the two can better cooperate, which is very necessary for macroeconomic stability and development."　　Ms. Hu stressed. This is the fourth consecutive dispatch since July 15, highlighting the central bank's determination to "enhance exchange rate flexibility". June 19, the People's Bank of China decided to further promote the reform of the RMB exchange rate mechanism, emphasizing on a basket of currencies to enhance monetary flexibility. After that, the renminbi has been "resilient" in currency markets. However, the United States and Europe and other countries pressure "renminbi value needs a one-time revaluation" voice is still constantly.　　Hu's four articles, from different sides, emphasize the importance of promoting the reform of RMB exchange rate mechanism to China's economy. Hu said that there is both a substitution and a complementary relationship between exchange rate changes and the adjustment of factor prices, which can effectively promote the development of macroeconomics. The price adjustment of factors of production is fast, then the pressure of exchange rate appreciation is small; if the RMB exchange rate fluctuates, the pressure of factor price rise will be reduced, there is a certain substitution relationship between them.　　If the factor price adjustment and the exchange rate change are reasonably combined according to the policy objectives and the economic situation, better results can be achieved. Hu said that factor price adjustment and exchange rate changes in terms of frequency, flexibility, action mechanism, impact range and so on. First of all, the adjustment of the generalized factor price in the direction of market determination has obvious inflation effect and distributive effect, it needs to be integrated with other policies, frequent operation is difficult, usually is the stage adjustment.　　Under the managed floating exchange rate system, the RMB can be depreciated, according to the economic situation and the balance of payments situation flexible dynamic changes. Secondly, the degree of flexibility is different. Under the managed floating exchange rate system, the exchange rates are stronger, can rise and fall, and the factor price of production has certain rigidity. Energy resources are generally becoming scarce, and their prices will continue to rise; environmental costs will always be levied, rarely halfway; Labor wages also have rigidity, in addition to the crisis, major technological breakthroughs, such as leading to phased decline, its long-term adjustment trend is one direction.　　While the exchange rate in the current account surplus or deficit, the market supply and demand under the action of flexible two-way change. Third, the exchange rate reform and the factor price adjustment has the difference to the enterprise's influence, the RMB exchange rate appreciation, may affect the export enterprise's price competitiveness, but is advantageous to the massive import foreign raw material, the semi-finished product production, mainly satisfies the domestic demand enterprise. In terms of factor price adjustment, labor price and Resource PriceAnd the rising cost of environmental protection has an impact on the whole social normal enterprise as a whole.　　Although enterprises through speeding up technological innovation, productivity growth and utilization of resources to increase the cost of some factors can absorb the burden of price increases, but the overall impact on the surface is broad, the conduction chain is also longer. Finally, the impact of the two reforms on inflation is different. Rising factor prices will directly increase inflationary pressures.　　If the RMB exchange rate in the market supply and demand effect of appreciation, will directly reduce the local currency prices of imported goods, and by promoting international balance of payments, reduce the passive delivery of basic currency, reduce inflationary pressure. Ms. Hu stressed that further increases in the renminbi's exchange rate would help create a stable and low inflation environment for factor price reforms, without hampering the broad production factor price adjustment. Past experience has shown that factor price adjustment mainly concerns the impact on inflation, income distribution and so on. For example, fuel tax reform has been brewing for more than more than 10 years, and there has been a lot of debate about the conditions, timing and distribution effects of the reforms. The larger concern is often whether factor price reform leads to inflation and whether it has a greater impact on income distribution. Exchange rate reform can mitigate this effect and promote factor price adjustment. Monetary policy operations have reserved space for the inflation zone.