China Tells

Yes, it is RMB, again and always. For economists and journalists all over the world, RMB policy is increasingly becoming an icon to be challenged and defeated. A recent article from Economist is one of such challengers. Unfortunately, the arguments from that article are not necessarily robust and convincing enough. Here goes the argument: 1) RMB should be revalued as RMB has depreciated 14% in the last 10 months. This argument can be defeated easily by looking at a currency chart for the last 18 months (See Graph from Chinatells). In fact, with a close look at the movement of world currency in the last 18 months, a peg policy to USD probably wins as it provides stability and predicatability, which is good news for corporates involved in international trade; 2) RMB shall be revalued to address the global ‘imbalance’. Another cliche, but even more unsounding than the first argument. In fact, the world economy has never been in a ‘balanced’ status and it would be a mistake to bark on the wrong tree to try to establish any causality between RMB policy and global imbalance (See Article from Chinatells). 3) China is too dependent on investment for growth, therefore RMB need to be revalued to adjust the economy growth model. It is a big question mark whether China is over dependent on investment. In fact, there are good counter argument on this issue (See Discussion from Chinatells). A commonly missed point is that China has a super high saving ratio, which makes its current investment ratio not necessarily high.

Overall, the RMB FX issue is a complicated one and need careful review. One will never reach a complete and objective conclusion without digging deep and thinking hard. Any simple-mindness like the article from Economist is exposed to a caveat to look into the matter from a biased perspective and therefore leads to premature conclusions.

人民币汇率政策总是能在国际论坛中引起激烈辩论。最近经济学家上的一片文章即是例证之一。可惜有很多类似的文章只见其一不见其二，提出要求人民币改汇的理由基础薄弱，逻辑混乱，很容易即被驳倒。总体而言，人民币汇率是一个比较复杂的问题，如果人云亦云，很容易得出肤浅的结论。