Europe and America since 2010, weak economic growth due to insufficient domestic demand, are adjusting their exchange rate policy, expected depreciation of the currency through the strategy to improve national competitiveness, and thus boost exports and economic growth. More recent U.S. House of Representatives passed the “Bill of exchange rate reform to promote fair trade” to the so-called undervalued currencies of countries to impose special tariffs, the adoption of this bill marks the formal outbreak of war in the global exchange rate.

Exchange rate of the underlying causes of war and Evolution

Since the outbreak of the global financial crisis, trade disputes continue, the direct cause of global effective demand due to falling market share worldwide re-distribution, is the international form of vicious market competition. In fact belong to a trade war exchange rate of the dispute, are an important part of a trade war.

The long term trend of economic globalization is irreversible, the international market, competition is only temporary emergency vicious behavior. As the world economy into a healthy stage of development, the global expansion of effective demand will once again, trade wars and currency wars and other issues will also be gradually eased. But the short-term action to strengthen the global monetary intervention, it will cause severe impact on global capital markets. Have the financial monopoly issuer of international reserve currency through the currency devaluation in reducing the burden of external debt at the same time to stimulate exports in order to achieve the balance of payments improved. These countries therefore have sufficient incentive to make the currency depreciation. Emerging economic cycle period and the reserve currency issuing countries are not consistent, but in order to maintain stability of the currency was forced to adjust their economic policies in accordance with European and American economic policy. This may trigger a new round of world currency devaluation.

Exchange rate impact on China dispute

The deepening of the global war exchange rate effects on China’s performance in the following aspects: First, the exchange rate of the dispute is designed to expand market share abroad, through currency depreciation strategy can effectively improve their competitiveness, and thus boost exports and economic growth. Not reach the expected appreciation of the renminbi, the U.S. and Europe to take more measures of trade protectionism, and to continue to put pressure on our government to make the deteriorating situation in China’s foreign trade; Second, the devaluation of the world’s dominant currency initiative, led many countries follow. Europe and America, the Chinese adopt a liberal policy in liquidity can only stay in the country, which will lead to inflationary pressures.

In addition, the liquidity spread and the dollar again will make a continuous depreciation of the value of re-assessment of resource materials, which brought our country imported inflation. Third, the recent frequent Europe to pressure the Chinese government. In a strong external pressure, despite the sharp appreciation of the RMB will not, but there is still a slight appreciation of the possible.

A dispute over the exchange rate on the impact of stock market

In response to interest rate competition and the rising pressure of RMB appreciation, China should take appropriate monetary policy. Lower CPI in the fourth quarter for our hikes adhere to easing monetary policy to create a better external conditions. In addition, appreciation is also expected to contribute to the inflow of hot money, the valuation of these are beneficial to raise the level of A shares.

Industry-specific point of view from the appreciation of RMB will benefit the import of raw materials or major equipment type industries, such as paper making, petrochemical, steel and so on. External debt but also more conducive to trade, such as the aviation industry.

By the depreciation of the dollar and the universal impact of loose monetary policy, world oil, food, gold futures prices of resource products and bulk to remain relatively sharp rise in the future, which is related to plate for the A-share market to bring trading investment opportunities.

Note that the margin of appreciation may be lower, competitive full adversely affect export sectors, such as garment and textile industries.

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Category: Business Management
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