人民币应该升值？课件

ShouldRMBAppreciate?

人民幣應該升值?

Shih-HsinEconomicsSeminar(世新經濟2003年學術研討會) October4,2003 Erh-ChengHwa華而誠 echwa@.tw

ShouldRMBAppreciate?

人民幣應該升值1

APreambleLately,RMB,theChinesecurrency,hascertainlybecomeoneofthehottestsubjectsininternationalfinance.Forinstance,G7withoutimplicatingChinabynamecalledforamoreflexibleAsiancurrenciesacoupleofweeksago.ThatthecurrencyofadevelopingeconomywithanaverageincomeofmerelyUS3,500orsoshouldcommandsuchanattentioncomesasabitofasurprise.WhyRMBallasuddenoccupiestheinternationalspotlight?Myspeechwill(I)analyzethebackgroundoftheinternationalcallforanRMBappreciation,(II)answerthequestion:isRMBundervalued?And(III)askiftherevaluationwillindeedsolvetheUSdeficitproblemandforthatmatterrestoreglobaleconomicimbalance?Andifnot,whatneedtobedone(conclusion). APreamble2I.Background:GlobalEconomicImbalance

TheglobaleconomyischaracterizedbyasignificantstructuralimbalancewiththeUSeconomyrunningalargecurrentaccountdeficitofover5%ofGDPin2003whileEurope,Japan,andtherestofEastAsiarunningsignificantcurrentaccountsurpluses.(Table1)I.Background:GlobalEconomic3Table1currentaccountbalanceUnitedStatesJapanEuropeanUnionChinaDynamicAsia1990-79.044.1-37.612619913.768.3-86.01361992-48.5112.6-81.2671993-82.5131.99.4-1261994-118.2130.410.9711995-105.8111.151.42-161996-117.865.879.87-71997-128.496.8110.73711998-203.8119.072.631581999-292.9114.814.921772000-410.3119.5-40.221692001-393.487.710.217732002-503.4113.674.63588Projections2003-587.1128.798.018108Projections2004-629.5160.599.515111Note:DynamicAsiaincludesTaiwan;HongKong;China;Indonesia;Malaysia;Philippines;SingaporeandThailandSource:OECDEconomicOutlookNO.73June2003AnnexTable50and52Table1currentaccountbalanc4ThislargeandrisingUScurrentaccountdeficithastriggeredaUSdollardepreciationsinceearly2002.ThisisaclearsignthatUScurrentaccountdeficitappearstobenolongersustainableandisindeedofcorrection.Whyaneverrisingdeficitisnotsustainable?Thisisbecauseeventuallytherisingdebtservicewillhavetocomeoutofnationaloutputandstarttohurtconsumptionandinvestment.SincetheUShasanegativenetinternationalinvestmentpositionalreadyonequarterofGDP,thedayofreckoningwouldarrive,ifthedeficitcontinues.(“PerspectivesontheU.S.CurrentAccountDeficitandSustainability”,CatherineL.Mann,JournalofEconomicPerspectivesVolume16,November3Summer2002152.)人民币应该升值？课件5TheglobaleconomicimbalancestemsfromanumberoffactorsincludingforemostamuchstrongereconomicgrowthintheUSthanmostofherimportanttradingpartnersinEuropeandAsia.Thatistosay,UShasbeentheonlygrowthdriverintheglobaleconomy,thoughlatelythereappearssignsoflifeinJapanandGermany,thenexttwolargesteconomiesintheworld.人民币应该升值？课件6Globaltradeimbalancelogicallycallsforthecorrespondingadjustmentintheexchangeratesforclosingthetradegap,eventhoughexchangerateadjustmentsdonotnecessarilyprovidetheultimatecure.Theconsequencesofrigidexchangeratesinthefaceoftradeimbalancearethepersistenceintheimbalanceandagrowingmisalignmentintheexchangerates.人民币应该升值？课件7ThisescalatestheriskofunexpectedsharpadjustmentsinexchangeratesandinthiscasetheUSdollarthatcouldcreatehavoctoglobaleconomicstability.USdollarhasindeedfallenandmostlyagainsttheeuro,notsomuchwiththecurrenciesofEastAsiansurpluscountries.人民币应该升值？课件8ThereasonisthatEastAsiacentralbankshaveintervenedheavilyintheforeignexchangemarketstopreventtheircurrenciesfromrisinginvalue.Asaresult,EastAsiacentralbanksseeabulgingintheirforeignexchangereserves.人民币应该升值？课件9Background:AWeakUSLaborMarketTheabovepresentsaneconomicargumentfortheUSdollartodepreciate,inparticular,againstAsiancurrenciesfromtheviewpointofglobaleconomicperspective.However,themajorimpetuscallingforanrevaluationofRMBstemsfromtheUSthatareechoedbytheJapaneseauthoritiesandincreasinglyalsobyotherssuchasSouthKoreaandEuropeancapitals.Background:AWeakUSLaborMa10TheUSpressurestemsfromanunusuallylacklusterUSjobmarketinthethirdyearofaneconomicrecoveryaswellasagrowingbilateralUS-ChinatradedeficitthatexceededUS100billion(2002)andconstitutedone-fifthofoverallUStradedeficit.Anunder-valuedRMBisblamedtohavecontributedtotheUStradedeficitandjoblossesinthemanufacturingsector.

人民币应该升值？课件11TheBushadministrationfacesthepoliticalpressurefrommanufacturinggroupsurgingtheUSgovernmenttakeatoughstanceagainstChinathattheadministrationwouldbehardtoignoreinthelightoftheforthcomingUSpresidentialelectioninlate2004.InearlySeptember,DemocraticsenatorfromNewYorkstateCharlesSchumersponsoredadraftresolutiondemandingtheimpositionof27.5%importtariffsonChinesegoodsunlesstheChinaagreestorevaluatetheChineseyuan.TheBushadministrationfaces12II.IsRMBundervalued?First,let’strytoanswerthechargethatChinahasmaneuveredtheexchangeratetounder-priceRMBforgainingunfairtradeadvantage.Onthesurface,ChinahasmaneuveredtheRMB/US$exchangeratesinceChinahasallowedaverynarrowfluctuationsintheexchangerateeversincetheinceptionofamanagedfloatingexchangerateregimeinChinaJanuary1994.II.IsRMBundervalued?First,13ThisalsosaysChina’scurrentexchangeratepolicyismoreachoiceoftheexchangerateregimethathasbeenmaintainedforlongratherthantheresultofshort-termopportunisticexchangeratemaneuveringtogaintradeadvantage.SinceRMBhaslargelypeggedtotheUSdollars,theRMB/US$exchangeratehastracedcloselythefluctuationsintheUS$.Overthelasttwoyears,asUSdollarhasbeguntodepreciate,sofollowedtheRMB(Chart1).ThisalsosaysChina’scurrent14Chart1realexchangeratesSource:USFederalReserveSystem、InternationalFinancialStatistics,IMFChart1realexchangeratesSo15TherecentdevaluationinRMBisthebasisforaccusingChina’sexchangeratepolicyandforurgingChinatoadoptamoreflexibleexchangeratepolicy,thecodewordfor“appreciation”.ButthecriticschosetoignorethatRMBequallyappreciatedintheprecedingyearswhentheUSdollarwasstrong.TherecentdevaluationinRMB16Moreimportantly,RMBdoesnotseemtobegrosslyundervalued.TheevidenceisChinadoesnotrunapersistentlargecurrentaccountsurplus.Recentlythesurpluseshavebeenintheneighborhoodof1-2%ofGDP.(Table2)Thesurplusindeedrosein2002astheexchangeratefell,butitisdestinedtodeclinein2003sincethetradesurplusfelltoUS$4.5billioninthefirsthalfof2003,orjust0.7%ofGDP,thatisUS$8.9billionlessthanayearearlier.Moreimportantly,RMBdoesnot17Table2AsianCurrentAccounts

(percentofGDP)19971998199920002001200220032004EastAsia1.65.03.32.52.83.63.02.7China,mainland4.13.31.61.91.52.71.61.5HongKong-3.12.77.55.57.510.711.58.5SouthKorea-1.712.76.02.72.01.30.0-0.3Taiwan2.41.32.92.96.49.27.98.0SoutheastAsia-0.210.210.58.17.07.26.36.0Indonesia-2.44.24.15.04.74.13.03.3Malaysia-5.913.215.99.48.37.66.35.7Philippines-5.12.38.77.40.41.62.02.5Singapore19.224.018.714.519.021.521.519.3Thailand-2.112.810.17.65.36.04.14.5Source:1)AsianDevelopmentOutlook2003，SpecialChapter，CompetitivenessinDevelopingAsia，PublishedfortheAsianDevelopmentBankbytheOxfordUniversityPress，TableA162)InternationalFinancialStatistics,IMFTable2AsianCurrentAccounts18Sincethecurrentaccountbalancemirrorstheunderlyingtheoutput/demandbalanceandthetradables/nontrablesbalance,themodestsurplusinthecurrentaccountsuggeststhattheChineseeconomydoesnotseemtosufferfromanysignificantstructuralimbalanceexperiencedbyeconomieswithpersistentandlargecurrentaccountsurpluses.Similarly,Chinahasnotunder-investedindomesticeconomyinexchangeoflow-yieldingforeignassetssuchasUStreasurybillsinanysignificantway.ThisveryfactsuggeststherealexchangerateofRMBisnotgrosslymisalignedwithitsfundamentals.人民币应该升值？课件19Butifso,whytheChinesemonetaryauthoritiesarecompelledtoadoptmoneytighteningmeasuresincludingahikingofthereserverequirements?Indeed,China’srecentmonetarysupplygrowthhasbeenabovethetargetthatmighthavebeenthefactorbehindthesurgeinrealestatepricesincertainlocalitiessuchasShanghai,eventhoughtheoverallinflationrateremainslow(CPIgrewby0.6%inthefirsthalfof2003).人民币应该升值？课件20Thereasonbehindthefastgrowthinmoneysupplyiscentralbank’smonetizationofarapidlyrisingstockofforeignexchangereservesstemmingfromarapidlyrisingcapitalaccountsurplusover2002-03(2.5%and3.1%ofGDP,respectively),ontopofthecurrentaccountsurplus.Fromalowleveloflessthan1%ofGDPduring1997-1999,theoverallbalanceofpaymentssurplussurgedto4.0%and5.8%ofGDPin2001and2002,respectively,whiletheforeignexchangereservesrosebyUS$47.4billionandUS$75.2billioninthesetwoyears;bothwerearecord.Thereasonbehindthefastgro21LargerFDIflowsfollowingChina’sWTOaccessioninNovember2001andmuchreducedcapitaloutflow(errorsandomissions)accountforthebulkoftheincreaseinthecapitalaccountsurplusoverthelasttwoyears.SpeculativecapitalinflowsthatareinfluencedbythemediadiscussionsofanimpendingRMBappreciationmighthavehiddenbehindcapitalrepatriation.Itappearsthistrendcontinueswellinto2003;inthefirsthalfof2003,FDIrosetoUS$30.3billion,34.3%overthesameperiodoflastyear,whileforeignexchangereservesrosebyUS$60.1billion.

LargerFDIflowsfollowingChi22Sincetheusesoftheforeignexchangeinvolvedinthecapitalaccounttransactions,aswellascurrentaccounttransactions,arestrictlycontrolledbythecentralbank(e.g.foreigntradecompaniesarerequiredtosurrendermostoftheirforeignexchangeproceedstothecentralbank),mostofthenetincreaseinforeignexchangereceiptsaremonetizedbythecentralbank.Ascapitalinflowacceleratedinthefirsthalf,sodidtheincreaseinmoneysupplytobeyondthetargetsetbythecentralbank.Sincetheusesoftheforeign23Althoughthegeneralinflationrateappearslowatthepresentmoment,asustainedincreaseinmonetarygrowthcouldgenerateassetpriceinflationorraisethepricesofnontradedgoodstothedetrimentalofincomeequalityaswellasinternationalcompetitiveness.Forthisreason,monetaryauthoritieshavehikedthereserverequirementandloosenedtherestrictionsontheuseofforeignexchangerangingfromtourismtoforeigntradeforreducingthemonetarygrowth.Althoughthegeneralinflation24III.WouldarevaluationinRMBapropersolutionforreducingtheUScurrentaccountdeficitandforrestoringglobalimbalance?EvenifRMBweretoappreciatesignificantly,thiswouldnothelptodenttheUScurrentaccountdeficitbymuch.China’soverallcurrentaccountsurplusaccountsonly7.3%ofthetotalUSdeficitin2002.Infact,bothJapanandAsianNICs’haveafargreatercurrentaccountsurplus.(Table3)III.WouldarevaluationinRM25Table3DistributionofUSCADeficitBillionUSdollar(%ofGDP)PercentageUnitedStates-481(-4.8)100EuropeanUnion54(0.9)11.2Japan112(2.8)23.3EastAsia(exceptJapan)72(3.6)14.9China,mainland35(1.9)7.3AsiaNIEs62(6.2)12.9SoutheastAsia(exceptSingapore)22(4.6)4.6Source:1)AsianDevelopmentOutlook2003，SpecialChapter，CompetitivenessinDevelopingAsia，PublishedfortheAsianDevelopmentBankbytheOxfordUniversityPress:TableA3.4，TableA15，TableA16.2)OECDEconomicOutlookNO.73June2003:AnnexTable51Table3DistributionofUSCA26Second,historically,thetradebalancedidnotseemtorespondtothechangesintherealexchangeratewithahighelasticity.Nevertheless,asChinagraduallyloosesthetraderestrictions,thepriceelasticityshouldriseovertime.Second,historically,thetrad27Chart2ChinaTradeBalanceandTheRealExchangeRateSource:InternationalFinancialStatistics,IMFChart2ChinaTradeBalancean28ThenthequestionfromtheUSperspectiveis:howtheUSistoreduceitsoverallcurrentaccountdeficitifthelargestbilateraldeficitwithChinathatexceededUS$100(2002)couldnotbereduced?TheanswerliespartlyinthefactthatChinahasbecomeasurrogateforallthecountriesthatareusingChinaastheplatformforexportingtotheUSinplaceoftheirowncountries.ThissuggeststhatthepenchantforforeigngoodsbytheUSmaybebyfarthemorecriticalfactortotheUStradeimbalancethanwhohavesuppliedthem.Similarly,alowergrowthintherestoftheworldthantheUSmatters.ThenthequestionfromtheUS29Butdoestheexchangeratematter?Yes,itdoes.Thefollowingchartshowsthatatleastsince1995whentheUSdollarstartedtorallyagainstothercurrencies,UScurrentaccountdeficithassteadilyworsenedfrom1.4%ofGDPtoover5%in2003.Nodoubt,theriseintherealexchangeratehasreflectedpartlytheproductivityincreaseassociatedwiththe“neweconomy”phenomenonbutthecurrentaccountbalanceworsenednonetheless.(Chart3)Butdoestheexchangeratemat30Chart3USCADeficitandTheRealExchangeRateSource:1)USFederalReserveSystem2)OECDEconomicOutlookNO.73June2003AnnexTable51

Chart3USCADeficitandThe31Nevertheless,withChinaoccupyingaweightof9.0%intheUSrealeffectiveexchangerateindex(2003)andwithanoverallsmallcurrentaccountsurplus,Chine