【Challenges,from,Changing,Economic,Situation】 from是什么意思

　　For long, China has been accustomed to the policy ideology of the unilateral appreciation of RMB. However, as the bilateral wide fluctuation of RMB is continued, this regular ideology should be changed.
　　 Great appreciation of RMB
　　In truth, the RMB has appreciated over 28% accumulatively in seven years since the exchange rate reform in 2005. The nominal exchange rate increase was 20% and the real exchange rate hit 30%. Meanwhile, the money of supply tripled within these three years, which was mainly attributed to the great expansion from 2008. The RMB has actually gone through a process of appreciating externally while depreciating internally. Now the RMB exchange rate is getting close to the equilibrium exchange rate. The International Monetary Fund (IMF) also softened its attitude in the matter that whether the value of RMB is underestimated or not by saying that the exchange rate of RMB against a package of major currencies is “slightly underestimated”.
　　The anticipation of RMB’s long-term unilateral appreciation is being shattered and even the stress of periodic depreciation has emerged. From this year, the hedging currencies represented by the US dollar went up thanks to the push of risk aversion. The nominal exchange rate of currencies in emerging markets against the US dollar mostly decreased. Though the RMB depreciation was not large, it still went down compared with its previous strong performance. On July 20, the exchange rate of RMB against the US dollar closed at 6.3743 yuan against one dollar. This was the first time that the exchange rate between the RMB and USD hit the lower bottom since the central bank capped the fluctuation of the exchange rate at 1%. It was also the lowest point of the RMB-USD exchange rate since it hit the record-setting level in April.
　　After the initiation of the exchange rate reform in 2005, RMB kept appreciating in most of the following time except the two-year skip after the financial crisis in 2008. The currency value appreciated 30% accumulatively within seven years. However, the trend in 2012 shows that new changes have occurred or are going to occur. The RMB exchange rate against the USD closed at 6.3320 on July 31, meaning that in July the RMB slightly depreciated 0.11%. It was the fourth month that the RMB saw depreciation in 2012 after January, March and May.
　　 The outflow of foreign capital
　　Actually, the trend of RMB appreciation was obviously eased from the second half of last year. From this April, the deteriorating European debt crisis kept worsening, pricking up the worries about the second time of hitting the bottom in the world. The risk appetite in the market greatly decreased. In addition, the economic growth of emerging economies was simultaneously eased, leading to their lesser attraction for foreign capital. Therefore, international capital fled from emerging markets and high-risk industries. As a result, the forecast about the RMB depression gradually gained the upper hand, which has following reflections:
　　The RMB counterpart of foreign exchange had an increase of 49.085 yuan in June. Let’s use a simple method of “monthly RMB counterpart of foreign exchange minus monthly goods trade surplus minus monthly actually utilized FDI” to estimate the short-term international capital flow. In June, the amount of hot money outflow reached 35.9 billion US dollars when the trade surplus of 31.7 billion US dollars and the FDI of 12 billion US dollars were deduced. The amount was larger than the 24 billion US dollars in May. From another viewpoint, the amount of capital outflow might be larger. As the data shows, the foreign exchange reserves of China was 3.305 trillion US dollars at the end of the first quarter of 2012 and 3.24 trillion US dollars at the end of the second quarter. The foreign exchange reserves of China reduced by 65 billion US dollars in the second quarter, but in those three months trade surplus never left China and the total surplus amounted to 68.7 billion US dollars. In addition to the FDI of 30 billion US dollars in that quarter, the outflow capital might amount to over 100 billion US dollars.
　　In the first four months of this year, the amount of actually-utilized foreign capital in China reached 37.881 billion US dollars, down 2.38% over last year. The FDI saw decrease for six straight months before a slight increase in May. But the slight increase was soon replaced by negative growth again in June, proving the longterm capital outflow.
　　Compared with the situation at the end of 2008 and the beginning of 2009, the current formation system of RMB exchange rate seems to be more changeable. The signal of capital outflow from the offshore markets becomes stronger. As a transfer station of the international capital’s flowing into/out of mainland China, Hong Kong always established the RMB deposit as the leading index of the international capital flow. In April this index closed at 552.4 billion yuan with a 0.4% month-on-month decrease –the decrease of four straight months. Compared with the historical high of 627 billion yuan in November, the RMB deposit in Hong Kong almost decreased by 12%, meaning that a large portion of enterprises and residents possibly turned their assets from RMB into US dollars or other currencies.
　　
　　The overseas Non-deliverable Forwards market saw the enhanced anticipation for the RMB depreciation. The average rate of RMB depreciation implied in one-year contracts in- creased to 1.17% and this rate kept expanding for three straight months, meaning that there exists further stress of RMB depreciation.
　　 New challenges from new changes
　　The anticipation for RMB appreciation is applying visible influence on the international income and expenditure and the international capital flow. In the first half of 2012, the capital and financial accounts of China had the deficit of 71.4 billion US dollars, which was mainly attributed to the influence of RMB exchange rate. For years, the anticipation for the unilateral appreciation of RMB and the fact that the actual yield of RMB is higher than other currencies determined that enterprises did not want to hold foreign exchanges or sell foreign exchanges, leading to the “corporate assets of RMB and liability of foreign currencies”. However, when the RMB has stepped into the equilibrium stage or even depreciates, the tendency changes will come out.
　　The troublesome sovereign debt crisis and the frequent flow of international capital enhanced the fluctuation of the Chinese economy. The European debt crisis affected the Chinese economy through shrinking demand, investment and financing, improving the uncertain outlook of the global economic recovery. There is still the risk of Greece quitting the Euro Zone and the Spain is going to be another victim of the crisis. The possible impact from the American“fiscal cliff” and the advent of the global liability financing peak will intensify the capital outflow and the stress of RMB depreciation. For the long term, there are no simple solutions to the sovereign debt crisis. The “removal of debts, leverages and welfares” is forcing China to make complete changes to its long-term reliance on high-speed growth. The stress for China to maintain its economic growth is not decreasing; instead, it is increasing.
　　The domestic and international situation in which China’s economy is growing at a fast pace is undergoing significant changes. This is both a test for the RMB exchange rate and a new challenge for the monetary department and decisionmakers. Against this new background, how to rebuild the way of internationalization for RMB based on the appreciation anticipation? How to improve the validity and flexibility of the monetary policy? And how to change the international expenditure and income accounts within the current foreign exchange management system? These are the bigger challenges in front of the decision-makers.

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