China Is Still The Largest Creditor Country In The United States.

China's State Administration of Foreign Exchange announced that as of the end of the first quarter, China's total foreign exchange reserves amounted to 3 trillion and 940 billion US dollars, ranking first in the world, accounting for 1/3 of the total foreign reserves.

According to the data released by the US Treasury, as of the end of April 2014, we held $1 trillion and 263 billion 200 million in US debt, and China remains the largest creditor country in the United States.

If you look at these data, is it another pride that you think China is very cattle? But I want to tell you that what you can think of is wrong.

According to the research data of the China International Economic Exchange Center, the national development and Reform Commission, as of 2010, the foreign exchange assets of Japan, Germany, the United Kingdom and the United States were as high as 4 trillion and 990 billion US dollars, 6 trillion and 910 billion US dollars, 12 trillion and 780 billion US dollars and US $15 trillion and 400 billion respectively.

In 2010, China's private foreign exchange amounted to about 150 billion US dollars, and now it is only about 250 billion US dollars.

Therefore, we can not just stare at the money in the government's hand, saying that we have a large amount of foreign exchange reserves.

Our official foreign exchange reserve is US $3 trillion and 940 billion, plus private $250 billion, and all foreign exchange reserves add up to a total of only 4 trillion and 190 billion US dollars, which is still worth the Japanese private foreign exchange reserve in 2010.

So stop imagining that we are a big country in foreign exchange reserves.

Three steps to save the people

So, what should we do next if we want to achieve the purpose of saving money in the people?

First, step by step.

Floating upper and lower limits.

We now stipulate that the RMB exchange rate can not fluctuate by more than 2% a day. Once the area is exceeded, the central bank will become the ultimate buyer and intervene in the market.

Such policies should be abandoned, otherwise the private sector will not have the power to hold foreign exchange.

Of course, letting go of the upper and lower limit of exchange rate does not mean letting the renminbi exchange rate. The government can intervene in the foreign exchange market when it is deemed necessary, for example, the Hongkong market in 1997.

Similarly, Japan intervenes in the exchange rate through the foreign exchange stabilization fund under the Ministry of finance.

Therefore, letting go of the floating ceiling is nothing but a bigger role for the market. The central bank only plays at the most critical moment.

Second, expand the scale of QDII.

At present, only 16 commercial banks are allowed to operate foreign exchange, and all investments must pass through them.

As I said before, it is difficult to have private foreign exchange market without releasing foreign exchange to real private enterprises.

We propose that all banks should open their foreign exchange businesses, including foreign banks in China.

Third, carry out experiments in the free trade area.

The law of Hongkong allows financial companies to operate foreign exchange, gold, stock and other businesses. The only restriction is that companies can not be opened outside Hongkong.

There are 151 licensed banks and 315 financial companies in Hongkong, and the most important participants in Hongkong's foreign exchange market are them.

We can learn from this. We should allow businesses registered in the FTA to operate businesses such as foreign exchange and gold.

I believe that as soon as the foreign exchange market is opened to the public, there will soon be an index of direct or indirect investment in US stocks.

In the future, domestic fund companies can also directly buy US stocks.

As a result, the volume of foreign exchange holdings will definitely rise, and our inflation pressure will be greatly reduced.

China's huge foreign exchange reserves were established through compulsory exchange settlement.

The US dollar exchanged for shirts, mobile phones and mineral exports must be changed to RMB according to the fixed exchange rate and foreign exchange will be accumulated for the country.

Therefore, since the reform and opening up, our foreign exchange reserves have increased rapidly, from US $167 million in 1978 to US $3 billion 372 million in 1988, US $144 billion 960 million in 1998 and US $1 trillion and 950 billion in 2008.

In 2008, our government began to realize that there were too many official foreign exchange reserves.

Therefore, the foreign exchange management regulations were amended in that year, making it clear that enterprises and individuals could reserve foreign exchange according to the regulations or sell foreign exchange to banks, which means that China has abandoned the policy of compulsory exchange settlement.

But even allowing companies to hold foreign exchange, from 2008 to now, foreign exchange reserves rose from $1 trillion and 950 billion to $3 trillion and 940 billion, and doubled.

What is the reason? Western countries, led by the United States, are constantly putting pressure on China to demand appreciation of the renminbi, and the pressure on RMB appreciation is enormous.

In 2008, the yuan was 7.1:1 against the US dollar. By the end of 2013, the yuan had reached 6.05:1 against the US dollar and appreciated by 18%.

As the RMB exchange rate continues to rise, enterprises will not hold foreign exchange in order to preserve value, but will convert into Renminbi at the first time after earning the US dollar.

This is why our foreign exchange reserves have remained high.

In May 12, 2014, Premier Li Keqiang said during his visit to Africa: "a lot of foreign exchange reserves are already a great burden for us, because it will become the basic currency of our country and will affect inflation."

Xia Bin, director of the Financial Research Institute of the State Council Development Research Center, pointed out in his book "ten questions about China's financial future": "since 2003, the people's Bank of China has hardly given loans to the four major commercial banks. Why is there so much money in society? Basically, the people's Bank has invested RMB in the form of foreign exchange purchase."

The impact of 4 trillion continued until 2012. In 2012, our manufacturing industry began to shift outwards, hot money began to flow out and foreign exchange reserves decreased.

Considering the most perfect situation, if we do not enforce the settlement of foreign exchange, let the exchange rate market develop normally, maybe our inflation will drop to 2% normal level.