Analysis Of The Root Cause Of RMB Appreciation Pressure

In July 21, 2005, the people's Bank of China announced that since the beginning of that day, China began to take market supply and demand as the basis and reference. A basket of currencies Regulated and managed. Floating exchange rate system The RMB exchange rate is no longer pegged to the single dollar, forming a more flexible RMB exchange rate mechanism. Promoting the reform of the RMB exchange rate formation mechanism will help to alleviate the imbalance in China's foreign trade, expand domestic demand and enhance the international competitiveness of enterprises. Since the reform of China's exchange rate in July 2005, the value of RMB has appreciated 21% against the US dollar. The following is the change of RMB exchange rate over the past five years. In July 21, 2005, China began the exchange rate reform. The exchange rate of RMB against the US dollar was 8.11: 1; in May 15, 2006, the central parity of the RMB against the US dollar broke through the 8 pass, which was 7.9982: 1; in April 10, 2008, the central parity of the RMB against the US dollar broke through the 7 pass and was 6.9920: 1; since 2009, the exchange rate of RMB against the US dollar was basically in the range of 6.81 to 6.85 yuan; in June 19, 2010, the people's Bank of China further pushed forward the RMB exchange rate reform and enhanced RMB exchange rate flexibility. It can be said that there are two kinds of pressure on exchange rate appreciation, one is short-term pressure, the other is long-term pressure. The former is the result of internal and external economic imbalances, showing a large surplus of international payments. The latter is the result of long-term economic strength, which is manifested by the continuous improvement of labor productivity and the enhancement of economic competitiveness. The two are different and closely related. The current situation in China proves this point.

　　 One reason: Internal and external economic imbalance and Sustained double surplus 

The double surplus of balance of payments refers to the surplus state where foreign exchange income is larger than foreign exchange expenditure at the same time in current account and capital and financial items in a country's balance of payments. From the definition of the balance of payments account, if we do not consider "error and omission", the sum of the two account surplus realized by double surplus is equal to the increase of foreign exchange reserves. From 1994 to 2010, except for capital and financial accounts in 1998, China has been in a double surplus situation between current account and capital and financial accounts for the other 16 years, and the scale of double surplus has expanded in recent years. With the development of the double surplus of the balance of payments, the scale of China's foreign exchange reserves began to increase rapidly since the beginning of 1990s. Especially since 2000, the growth of foreign exchange reserves has shown an accelerating trend, and the increment of foreign exchange reserves has increased year by year. By the end of 2010, China's foreign exchange reserves have reached 2 trillion and 800 billion US dollars, and since 2006, it has been the world's largest foreign exchange reserve country.

　 1. "double surplus" brings. RMB appreciation pressure 

The "double surplus" means that the supply of RMB is less than that, which will lead to RMB appreciation. According to the theory of balance of payments, exchange rate depends on the supply and demand of foreign exchange, and the supply and demand of foreign exchange is determined by the balance of payments. The current-account surplus and the surplus of capital and financial items mean that the demand for RMB in the foreign exchange market is greater than that of supply. Because the supply of RMB is less than demand, the price of RMB will rise, that is, the exchange rate will decline and the RMB will appreciate. The large inflow of foreign direct investment (FDI) and international speculative capital is one of the reasons for the double surplus. In the process of transferring to China, most foreign capital enterprises choose processing trade to make use of China's cheap labor force to complete simple assembly. Because the export volume under processing trade is greater than the import volume, that is, trade brings value added to processing and production, which will inevitably bring about the current account surplus of the balance of payments. In recent years, in the real estate market, the stock market and the expectation of RMB appreciation, large scale speculative capital flows to China through various channels, resulting in a surplus of capital and financial accounts of the balance of payments. Moreover, China's asymmetric international balance of payments policy that encourages exports and encourages foreign capital flows is also the reason for the double surplus. In terms of institutional arrangements, China clearly encourages exports and encourages foreign capital inflows. Since the reform and opening up, China has adopted a series of preferential policies to encourage exports and develop an export-oriented economy in order to solve the contradiction between shortage of funds and foreign exchange and economic development.
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2. structural imbalance of savings over consumption

We know that the balance of foreign trade is actually equal to the net savings of a country (savings investment = export to import), so the current account surplus represents the net foreign investment of a country. The long-term surplus of China's current account highlights the problem of excess savings in China. Since 1990s, China's savings rate has been maintained at a relatively high level, which is not only related to the low consumption tendency of residents in China, but also to the increase of precautionary savings, and also to factors such as advocating thrifty culture. The average annual savings rate in China is only second of that in Singapore, which is higher than the domestic savings rate in Japan when it takes off, far higher than that in Latin America and other developing countries.

　 Two reasons: the improvement of labor productivity in the trade sector

The terms of trade in international trade is an important issue. The so-called trade terms are the relative prices of the import and export commodities of a country in the international market. The fundamental way to improve the terms of trade is to increase the productivity of the tradable sector and the economic competitiveness of the export sector. On the other hand, when the other conditions remain unchanged, the result of the increase of labour productivity is, on the one hand, the actual reduction of product cost and price, and on the other hand, the appreciation of the real exchange rate. Since reform and opening up, especially since the 90s of last century, due to technological progress and institutional change, labor productivity in China's manufacturing and tradable sectors has been increasing. Here, it is necessary to point out that, for the division of tradable and non trade sectors, trade goods are mostly concentrated in the industrial sector, and non tradable goods are mostly concentrated in the service sector. According to the current statistics, industrial sectors, including mining and manufacturing, and the production and supply of electricity, gas and water, I choose a comparative analysis of labor productivity and wages in China and the United States as an analysis of labor productivity in the Sino US trade sector.

The labor productivity of manufacturing industry in China and the United States was divided in 1991. In 1991, the labor productivity of China's manufacturing industry was basically lower than or equal to that of the United States, but after 1991, the labor productivity of China's manufacturing industry was significantly higher than that of the United States. In terms of wages, the annual wage growth rate of Chinese manufacturing workers is obviously faster than that of the United States. The average wage of Chinese manufacturing industry in 1986 to 2006 is 17.4%, while the United States is 2.6% in the same period, and China's average annual output is 14.8 percentage points higher than that of the United States.

The wage and labor productivity of manufacturing workers in China were divided in 1991. Before 1991, the average annual growth rates of nominal wages and real wages in China were 10.7% and 5.6%, respectively, 5.8 percentage points higher than that in the United States and 5.3 percentage points respectively. However, the annual growth rate of labour productivity is 2.2%, lower than that of the United States. Under the background of the substantial increase in nominal wage relative labor productivity, the relative unit labor cost (nominal wage / labor productivity) has risen sharply. Since 1991, as the nominal wage keeps growing rapidly and prices fall sharply, the average annual growth rate of real wages in China is two times higher than that in the previous period, which is 14.9 percentage points higher than that in the United States. Most importantly, the average annual growth rate of labor productivity in China is 14.1%, which is 6 times more than the same index in the previous period, which is 10.3% higher than that in the same period in the United States. Because of the labor production of the tradable department.
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　 Three of reasons: enhancement of international competitiveness of industry

The trade competition index, also known as the comparative advantage index, is an important index reflecting the international competitiveness of the industry. This index is compared with the total amount of imports and exports of a certain trade product compared with the total import and export volume, namely TCi = Xi Mei) / (Xi + Mei), where TCi is the trade competitiveness index of I products of one country. Xi is the export volume of I products for a certain period of time, and Mi is the import volume of the same period I products of the country. It is a powerful tool for the analysis of the international competitiveness of the industry. It can reflect whether a product produced by the country is relative to the competitive advantage or disadvantage of the other countries in the world market. If the trade competition index is greater than 0, it means that a country is a net exporter or a net supplier of I products. The I products of the country have strong international competitiveness. The closer the trade competition index is to 1, the stronger the competitiveness. If the trade competitiveness index is less than 0, it means that a country is a net importer of I products, and the country lacks competitiveness in such products. The closer the trade competition index is to - 1, the weaker the competitiveness. If the trade competition index equals 0, it means that the I production efficiency of the country is comparable to that of the international level. Since the reform and opening up, the trade competitiveness index of China's resource intensive products has dropped from 0.134 in 1980 to - 0. 5, 7 7 in 2006. The overall comparative advantage of China's resource intensive products is decreasing. The reason is that China's extensive economic growth mode consumes too much resources. Our resources are relatively inadequate and we have to rely on imports. Products belonging to capital and technology intensive products are gradually transformed from comparative disadvantage to comparative advantage. The reason for this is that the entry of foreign capital has partly made up for the shortage of capital and technology in China. Especially after 1990s, the investment of multinational companies in China has been invested in labor-intensive projects from the early 90s to the labor-intensive projects. The proportion of "three to one subsidy" has changed to a proportion of more than 200 of the 500 major transnational enterprises in the mid and late 90s. International investment in capital intensive industries and capital intensive industries is an important reason for the improvement of the comparative advantage of China's capital intensive industries. China's labor-intensive products, SITC6. The trade competitiveness index of finished products classified as raw materials rose from 0 to 19 in 1980 to 0.314 in 2006. The index of trade competitiveness increased, while the comparative advantage increased. SITC8 trade declined in the first half of 2006. Therefore, China's labor-intensive products still have a strong comparative advantage, which is related to the low wage level that China has been maintaining. Although the comparative advantage of resource-based products is declining, the relative proportion of its imports and exports in China is relatively low, which is 14.5%, which makes its impact on international trade relatively small. The main proportion is labor-intensive products and capital technology intensive products, accounting for 85.5% of the total. The comparative advantage of capital technology intensive products is enhanced, and labor-intensive products still maintain a strong comparative advantage. Under such circumstances, it is expected that China will maintain a favorable balance of trade for a long time to come.