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The central bank responded to what it meant for the United States to list China as an exchange rate

​&# 8203;&# 8203;&# 8203;&# 8203;&# 8203;&# 8203; For two consecutive days, Sino US trade tensions continued to escalate. Yesterday, the RMB exchange rate 'broke 7', and US stocks recorded the largest intraday decline this year, with a market value evaporation of more than 700 billion US dollars (nearly 5 trillion yuan). After the closing of U.S. stocks, U.S. Treasury Secretary manuchin declared that China was identified as a currency manipulator. This is the first time in 25 years that the United States has recognized China as a currency manipulator.

Source: US Treasury twitter

After the closing of a shares today, the Central Bank of China issued a statement saying that China deeply regrets this. This label is inconsistent with the quantitative standard of the so-called "exchange rate manipulator" formulated by the US Treasury Department. It is a wayward act of unilateralism and protectionism, seriously undermining international rules and will have a significant impact on the global economy and finance. Regardless of the facts, the United States unreasonably labeled China as a "currency manipulator", which is an act of harming others and ourselves. China firmly opposes this.

The central bank said that China implements a managed floating exchange rate system based on market supply and demand and adjusted with reference to a basket of currencies. In terms of mechanism, the RMB exchange rate is determined by market supply and demand, and there is no problem of "exchange rate manipulation". Since August this year, the RMB exchange rate has depreciated to a certain extent, which is mainly a reflection of market supply and demand and international exchange market fluctuations under the background of changes in the global economic situation and intensified trade frictions. It is driven and determined by market forces. The people's Bank of China has always been committed to maintaining the basic stability of the RMB exchange rate at a reasonable and balanced level, which is well known in the international community. According to the data released by the bank for International Settlements, from the beginning of 2005 to June 2019, the nominal effective exchange rate of RMB appreciated by 38% and the real effective exchange rate appreciated by 47%. It is the strongest currency in the G20 economies and one of the currencies with the largest appreciation worldwide. In the just concluded Article IV Consultation of the International Monetary Fund on China, the International Monetary Fund pointed out that the RMB exchange rate is generally in line with the fundamentals. During the Asian financial crisis in 1997 and the global financial crisis in 2008, China has always promised to maintain the stability of the RMB exchange rate, which has strongly supported the stability of the international financial market and the global economic recovery. Since 2018, the United States has been escalating trade disputes. China has always insisted on not engaging in competitive devaluation. China has not and will not use the exchange rate as a tool to deal with trade disputes.

Last night, Yi Gang, governor of the people's Bank of China, spoke on the RMB exchange rate. He said that China adheres to the exchange rate system determined by the market, does not engage in competitive devaluation, does not use the exchange rate for competitive purposes, and will not use the exchange rate as a tool to deal with external disturbances such as trade disputes. All along, the people's Bank of China has been committed to maintaining the basic stability of the RMB exchange rate at a reasonable and balanced level. I believe everyone can see this effort.

A shares opened lower today, breaking the 2800 point mark. As of the close, the three major stock indexes collectively fell by more than 1%. The Shanghai index fell 1.56%, the Shenzhen Component Index fell 1.56% and the gem index fell 1.53%. On the disk, there is no obvious hot plate, and only secondary new shares are active.

What does' currency manipulator 'mean

Exchange rate manipulation means that the exchange rate is artificially manipulated to make it appear relatively low and make the export price of goods seem cheap. Because the export price is cheap, the goods are welcomed by the importing countries, and the people of the importing countries correspondingly reduce the purchase of domestic products, which leads to the loss of domestic employment.

'currency manipulator' is recognized by the US Treasury Department. The U.S. Treasury Department will issue an exchange rate policy report every six months to analyze whether the monetary exchange rate policies of major trading countries against the United States exist to obtain unfair trade advantages by manipulating exchange rates. The specific time is in April and October each year.

But now it is not October, and the move of the United States has not been carried out as planned.

According to the trade simplification and trade Enhancement Act of the United States in 2015, when a country meets these three criteria at the same time, the United States will recognize it as an "exchange rate manipulator": first, a country's trade surplus with the United States exceeds US $20 billion; Second, the current account surplus of the country accounts for more than 3% of GDP; Third, the country's purchase of foreign exchange to devalue its currency exceeds 2% of its GDP. At present, the RMB only meets the first standard.

From 1992 to 1994, the United States identified China as a "currency manipulator" five times. Since 1994, the United States has not listed any major trading partners as exchange rate manipulators.

It is worth noting that trump repeatedly accused China of manipulating its exchange rate during his 2016 election campaign and early in office, and will label China as a "currency manipulator". On the morning of August 5, trump said on twitter that "China has reduced its currency exchange rate to an almost all-time low, which is called currency manipulation". He also shouted to the Fed, 'fed, are you listening?' This is a major violation '.

Source: trump twitter

What does it mean to be listed as a 'currency manipulator'

If China is listed as a 'currency manipulator', the United States will occupy the moral commanding height, which may provide reasons for the United States to impose trade sanctions on China, resulting in greater trade frictions between China and the United States, such as being excluded from U.S. government procurement contracts.

Labels listed as currency manipulators do not immediately trigger penalties. According to the trade simplification and trade Enhancement Act of the United States of 2015, if the bilateral negotiations fail after one year, the president of the United States can take relevant relief measures, including: prohibiting overseas private investment companies from approving any financing located in the 'manipulating country', such as insurance, reinsurance and guarantee; Prohibit the federal government from purchasing goods or services from the 'manipulating country'; Instruct the executive director of the United States in the International Monetary Fund (IMF) to initiate an additional rigorous review of the macroeconomic exchange rate policy of the 'Manipulator'; Instruct the office of the United States Trade Representative (USTR) to consult with the Treasury Department to consider whether to modify bilateral or regional trade agreements with 'manipulators' or initiate bilateral or regional trade agreement negotiations.

Zhang Huanbo, a researcher at the China Center for international economic exchanges, said in an interview with reference news last year that the United States first labeled other countries as "exchange rate manipulators" in 1988, but after the establishment of the WTO in 1994, the U.S. government stopped making such a determination because it ran counter to the free trade spirit advocated by the WTO. " When a country determines whether another country manipulates its exchange rate, it already reflects its own protectionist tendency and goes beyond the scope of its own exercise of national sovereignty. "

Yi Gang: we will not use the RMB exchange rate as a tool to deal with trade disputes

Yesterday, the RMB's onshore and offshore exchange rates against the US dollar both 'broke 7', and the relevant person in charge of the people's Bank of China responded quickly. The central bank said that China implements a managed floating exchange rate system based on market supply and demand and adjusted with reference to a basket of currencies. Market supply and demand play a decisive role in the formation of exchange rate. The fluctuation of RMB exchange rate is determined by this mechanism, which is the due meaning of floating exchange rate system. From the perspective of the global market, as the price comparison between currencies, exchange rate fluctuations are also normal. With fluctuations, the price mechanism can play the role of resource allocation and automatic adjustment.

If we look back on the changes of RMB exchange rate in the past 20 years, we will find that the RMB against the US dollar has been more than 8 yuan, more than 7 yuan and more than 6 yuan. Now the RMB exchange rate has returned to more than 7 yuan. It should be noted that the RMB exchange rate 'breaks through 7'. This' 7 'is not an age. It can't come back in the past, nor is it a dam. Once it is broken, the flood will flow thousands of miles. " 7 'it's more like the water level of a reservoir. It's higher in the wet season and will fall again in the dry season. It's normal to rise and fall.

Last night, Yi Gang, governor of the central bank, also spoke. He said, "as a responsible big country, China will abide by the commitment spirit of the previous G20 leaders' summits on the exchange rate issue, adhere to the exchange rate system determined by the market, do not engage in competitive devaluation, do not use the exchange rate for competitive purposes, and will not use the exchange rate as a tool to deal with external disturbances such as trade disputes. All along, the people's Bank of China has been committed to maintaining the basic stability of the RMB exchange rate at a reasonable and balanced level. I believe everyone can see this effort. "

Yi Gang pointed out that at present, China's economy is making steady progress, and its economic growth ranks in the forefront among major economies, showing great resilience, potential and room for maneuver. The overall balance of payments is balanced, foreign exchange reserves are sufficient, more and more enterprises hedge in the foreign exchange market, and the interest margin between China and major developed economies is in an appropriate range, which can support the basic stability of the RMB exchange rate.

Yi Gang said that the people's Bank of China and the safe will maintain the stability and continuity of foreign exchange management policies and ensure the reasonable and legitimate demand for foreign exchange by market entities such as enterprises and individuals. We will deepen reform and opening up in the field of foreign exchange, further improve the liberalization and facilitation of cross-border trade and investment, and serve the development of the real economy and the new pattern of China's comprehensive opening-up.

Yi Gang stressed, "whether from the fundamentals of China's economy or from the balance of market supply and demand, the current RMB exchange rate is at an appropriate level. Although the RMB exchange rate has fluctuated due to external uncertainties recently, I am confident that the RMB will continue to be a strong currency. The people's Bank of China is fully experienced and capable of maintaining the smooth operation of the foreign exchange market and maintaining the basic stability of the RMB exchange rate at a reasonable and balanced level. "

The United States also included these countries on the watch list of exchange rate manipulators

On May 28 this year, the US Treasury Department decided not to list China as a currency manipulator, but it and eight countries including Germany, Ireland, Italy, Japan, Malaysia, Singapore, South Korea and Vietnam were included in the list of "observed countries". According to the report, the RMB exchange rate against the US dollar fell by 8% last year, and China's trade surplus with the United States reached US $419 billion by the end of 2018.

China's Foreign Ministry spokesman Lu Kang said at the time he hoped the US side could act in accordance with multilateral rules and not unilaterally assess its exchange rate.

The recognition criteria of the US Treasury for including major trading partners in the exchange rate policy monitoring list are as follows: the proportion of current account surplus in GDP is reduced from at least 3% to at least 2%; The duration of continuous unilateral intervention in the exchange rate market was shortened from at least 8 months in 12 months to at least 6 months in 12 months; The bilateral goods trade surplus with the United States is still at least $20 billion.

The US Treasury said that if an economy meets two of the above criteria, it will be included in the exchange rate policy monitoring list for close observation; However, if the trade deficit between the United States and an economy accounts for a large proportion of the overall trade deficit of the United States, even if the economy does not meet two of the above criteria, it will be included in the monitoring list.

Italy, Ireland, Malaysia, Singapore and Vietnam were included in the list of "observed countries" because of the lower review threshold.

The trade situation stirred the global market: US stocks were bloodwashed and the Shanghai index fell 2800 points

The prospect of the global trade situation continued to be cloudy. On August 5, from the Asia Pacific to Europe and then to U.S. stocks, the global stock market plummeted and trembled, which can be called "Bloody Monday". This wave of "trump market" has also wiped out billions of yuan of market value in global stock markets.

In the morning of August 6, the major stock indexes of Asia Pacific stock market